South America’s soybean situation has followed two contrasting narratives in the past few months.
The first one is dry and hot weather in the northern areas of Brazil, as well as wet weather in the south, that will prevent a second-straight record-breaking crop and raise worldwide soybean prices.
The other is that Argentina could potentially double its soybean production this year compared to a drought-stricken 2022-23, adding to supply and bringing prices down.
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Recent weather has made a case for the latter.
Various amounts of rain in much of Argentina and Brazil over the past week have improved the conditions of their respective soybean crops. For Argentina, it brought moisture to a crop that is making its way back to normal production levels. In Brazil, it eased fears of a heat-damaged crop in a country where 2023-24 production estimates went from at least 160 million tonnes last fall to around 150 million now.
In December’s monthly World Agricultural Supply/Demand Estimates from the United States Department of Agriculture, Argentina and Brazil were expected to combine for 209 million tonnes of soybean production in 2023-24, compared to 185 million in the previous year. Even if Brazil’s production went down to 150 million, it would still be a net increase in total production.
In addition, increased demand for biofuels could potentially raise soybean acreage in the U.S., with seeded area possibly up to 88 million acres, according to some analysts. U.S. farmers planted 83.6 million acres of soybeans in 2023.
On the Chicago Board of Trade, the March soybean contract fell 44.5 US cents per bushel over the past week, to close at $12.67 on Jan. 4. March soymeal went down 14.5 cents per short ton but March soyoil went up 0.18 US cents per pound at 48.16.
Soybeans and soymeal are nearly oversold (both at 32), according to the Relative Strength Index, but also have net long positions of 11,500 and 64,400 contracts, respectively. March soyoil is net short 49,400 contracts with an index of 38.92.
While canola tends to follow soyoil more than the other two pillars of the Chicago soy complex, the outlook for the oilseed is gloomy. El Nino is expected to dissipate by this spring, which may moderate weather conditions in Western Canada and the U.S. and allow at least average canola and soybean production.
While an index value of 31 and a record net short position should indicate a rebound in canola prices in the long term, the situation in South America should keep canola prices down in the short term.
