Rethinking the 2022/23 Soybean Market Forecast
The United States Department of Agriculture (USDA) experts have made some adjustments in their May report for the Fiscal Year (FY) 2022/23 soybean production and ending stock forecasts. The slight increase in these figures is expected to exert additional pressure on the market quotes in the new season.
The initial reserves prediction underwent a reduction of 1.06 million tons, resulting in a total of 98.67 million tons. This figure is slightly lower than the 100.35 million tons reported in FY 2021/22. On the other hand, the global production estimate received a bump of 0.78 million tons, raising the total to 370.42 million tons. Notably, Brazil saw a 1 million ton increase to 155 million tons. However, Argentina’s production forecast remained at 27 million tons, a significantly lower figure compared to the 43.9 million tons of FY 2021/22.
2023/24 MR: An Optimistic Outlook
The USDA released its first balance sheet for soybeans for FY 2023/24, pointing to a record increase in the global production forecast. The estimate has risen by 40.2 million tons to an unprecedented 410.6 million tons. This surge is a result of increased production in multiple countries, including Brazil, Argentina, Paraguay, the USA, and China.
Brazil’s production forecast saw a significant increase of 8 million tons, reaching a historic maximum of 163 million tons. Argentina’s forecast improved by 21 million tons to 48 million tons, and the USA forecast was raised by 6.3 million tons to 122.7 million tons due to improved productivity.
Global Trade and Ending Stocks for 2023/24
The forecast for global soybean trade in FY 2023/24 has been raised by 4 million tons to 172.4 million tons. This increase is attributed to China’s increased demand and increased supplies to Egypt, Pakistan, and Bangladesh. Brazil’s export estimate has been increased by 3.5 to 96.5 million tons, Argentina’s by 1.3 to 4.6 million tons, and Paraguay’s by 0.2 to 5.9 million tons.
In terms of global ending stocks, the estimate has been raised to 122.5 million tons, a significant increase from the previous 101.04 million tons. This growth will be most pronounced in Brazil, the USA, Argentina, and China.
Market Reaction and Future Considerations
Despite the optimistic projections for FY 2023/24, traders are still cautiously optimistic, primarily due to the uncertainty of the weather conditions. El Niño phenomenon’s warming effect is expected after three years of the long La Niña phenomenon, which could significantly affect temperatures and rainfall intensity in various regions.
In response to the report, July soybean futures on the Chicago Stock Exchange fell 1.1% to $510.7/t, and November futures dropped 2% to $449.7/t. Therefore, these figures underscore the importance of monitoring the soybean sowing in the USA and the harvest in Argentina. These factors will play a critical role in shaping the balance of the soybean market in the coming months.