Futures price down $100 per tonne | Analyst predicts Brazilian harvest at 96 million tonnes and Argentina at 57 million
As analysts debate the size of the potentially record breaking U.S. soybean crop, early projections are surfacing about the coming South American crop and expectations are that it too will be massive.
Estimates for the Brazilian crop range from 91 to 96 million tonnes, all of which would shatter this year’s record of 87.5 million tonnes.
There are fewer forecasts for Argentina’s crop, but the ones available call for anything from 54 to 57.4 million tonnes. At the high end of that range, it would be another record crop.
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A huge South American soybean crop would add to what is expected to be a burdensome U.S. supply, putting further pressure on global oilseed prices.
“At some point the market needs to send the message that we don’t need all these acres,” said Dan Basse, president of AgResource Company.
“If you look at world ending stocks of soybeans at 80 million tonnes, we don’t need to take that to 90 million tonnes next year.”
Barring weather problems, he anticipates soybean prices will gravitate towards $8.48 per bushel next year, which is the target level of support in the new U.S. Farm Bill.
“(Canola prices) will fall equally hard and fast,” said Basse.
He believes canola will reach a bottom of $330 to $350 per tonne next year, down $80 to $100 per tonne from the November futures price as of Aug. 15.
Josh Senechal, meteorologist with Freese-Notis Weather, said there is abundant soil moisture in much of Brazil and Argentina heading into the planting season, which typically starts in northern Mato Grosso, Brazil in mid-September.
“They look a lot better now than they did this time last year, so they’re already off to a much better start,” he said.
The other big weather factor will be El Nino. Most meteorologists thought an El Nino cycle would have begun by now, but it hasn’t materialized.
Senechal said most climate models suggest an El Nino will develop by fall.
“I do believe we should have at least a weak El Nino in time for their planting season in South America and we could have a moderate El Nino towards the peak of their growing season,” he said.
An El Nino typically favours above normal rainfall for much of Brazil and northern Argentina. Surprisingly, that doesn’t necessarily result in improved soybean yields.
“In some El Nino years, you get too much rainfall,” said Senechal.
“Even in a normal year, you can get tremendous rainfall down in Brazil. They’re well known for having the most intense thunderstorms in the world.”
However, he remains optimistic about production potential due to the abundant soil moisture heading into the planting season.
The U.S. Department of Agriculture is forecasting 91 million tonnes of production in Brazil and 54 million tonnes in Argentina. Most analysts think those are conservative numbers.
Rich Nelson, chief strategist with Allendale Inc., is forecasting a four percent increase in soybean acreage in Brazil and a two percent hike in Argentina.
“Producers are certainly saying corn is too expensive to plant and doesn’t have the price and they still like those soybean yields they’ve been getting,” he said.
Nelson’s production estimate for Brazil is 96 million tonnes. He’s forecasting a 57.4 million tonne crop in Argentina.
Basse is forecasting 92 to 94 million tonnes of Brazilian production and 55 to 57 million tonnes in Argentina.
“We’ve had a lot of Brazilians through the office here in the last couple of weeks and they all have the same story. Because of sliding world corn prices they’re going to be planting more beans,” he said.
That doesn’t bode well for global supply because analysts think the U.S. crop is going to be even bigger than the record 3.84 billion bushels the USDA is forecasting.
“We think the final U.S. crop number could have a four in front of it,” said Basse. “We think we could add another 150 to 170 million bushels.”
Nelson believes yields will exceed the 45.4 bushel per acre national average USDA forecast. The USDA forecast implies a 104.5 million tonne crop.
“There is some speculation that perhaps this crop is a 47 to 49 bushel per acre crop here in the U.S.,” he said.
A 49 bushel average would add another 303 million bushels or 8.25 million tonnes of soybeans to an already bloated U.S. supply.
