Dry weather in South America over the past 2 months has significantly depressed forecast soybean yields and slashed production. In the first USDA forecast released in May 2021, the combined total 2021/22 soybean crop in Brazil, Argentina, and Paraguay was a record but is now forecast to be the smallest crop since 2018/19. Since the December 2021 WASDE, soybean production in these three countries has been lowered by more than 18 million tons: down 7 percent in Brazil, down 9 percent in Argentina, and down 37 percent in Paraguay.
If realized, this massive decrease in the South American soybean crop is likely to significantly constrict global trade. In total, South America soybean exports are cut nearly 6 million tons this month and crush is down over 2 million tons.
In Brazil, smaller production is expected to impact the export market more than domestic crush. In Paraguay, both exports and crush are forecast down around 1 million tons. Argentina supplies are squeezed from both lower production and smaller imports from Paraguay, resulting in both lower exports and crush.
Likewise, 2021/22 global soybean imports are no longer expected to be a record and global soybean meal consumption growth is forecast below 2 percent for the first time this forecasting cycle.
With tighter supplies supporting higher prices, consumers are likely to import fewer soybeans and offset smaller supplies by drawing down stocks, decreasing soybean meal consumption, or substituting with other protein meals.
Along with waning soybean and meal trade, soybean prices have jumped in response to the smaller South American crop and forecast tight stocks. As of February 7, soybean export prices have shot up to near‐decade highs at $640/ton FOB Argentina (Up River) and $627/ton FOB Brazil (Paranagua).
Since the release of the December 2021 WASDE, soybean export prices have jumped 17 percent in Argentina and 22 percent in Brazil. A large portion of these price gains are due to expected tight soybean stocks in Argentina and Brazil at the end of September 2022, which are forecast to be an 8‐year‐low at a combined 45 million tons.
The changing soybean market dynamics in South America may have bullish implications on exports of the upcoming U.S. soybean crop. In response to climbing soybean prices in South America, U.S. soybean export prices are up 25 percent since the December WASDE. Additionally, tight South America stocks at the start of the U.S. harvest and peak soybean export season in October 2022 have the potential to boost U.S. exports.
For instance, September 2022 ending stocks in Brazil are forecast to be only 2 million tons larger than they were 2 years prior, which coincided with a record export pace of U.S. soybeans during the beginning of the 2020/21 marketing year. Assuming import demand in China and other key markets remains little changed this year, 2022/23 U.S. soybean exports seem poised to benefit from both tight South American exportable supplies and high prices.
China Soybean Imports Contract
China soybean imports in marketing year 2021/22 are forecast 3.0 million tons lower this month at 97.0 million tons. From October to December, imports are down 13 percent from the previous year. The pace of soybean processing has slowed since October 2021 as margins are squeezed and crushers have been hampered by high input costs and low feed demand. Similarly, soybean processors in China are projected to reduce crush volumes by 3.0 million tons from the January forecast.