Grain Market Review: Soybeans

by Emily Wilson
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World soybean production is forecast to rise to 177.2 million tonnes in 2001-02 from 172.1 million tonnes in 2000-01, up about 3%, while crush should reach a record 151.9 million tonnes and exports are projected at 55 million, according to a recent report by the U.S. Department of Agriculture.

U.S. soybean output in 2001-02 as of early July was estimated to increase by about 6% from the previous season, based on plantings and growing conditions to that point. But as of mid-July, hot weather in the U.S. Midwest and forecasts for more of the same through the end of the month had cast uncertainty over crop development, driving prices higher.

For Brazilian farmers, soybeans have been a very good hedge against currency fluctuations. Despite weak soybean prices in dollar terms, Brazil’s exchange rate, which has depreciated by one-fourth against the U.S. dollar this year, will support internal soybean prices and plantings in 2001-02.

Although soybean yields are not expected to exceed this season’s peak, a 3% increase in area should push the harvest beyond this year’s record 37.5 million tonnes to 38.0 million. Production plus a bigger than usual soybean carryover should help Brazilian soybean exports expand to 14.8 million tonnes from 14.0 million in 2000-01.

Exchange rates are not the only factor affecting production incentives in Brazil. Because of difficulty paying off foreign debt, Argentina’s government modified its fixed exchange rate regime, which in effect amounted to an 8% devaluation on export commodities. Although the depreciation should be less acute than what Brazil has experienced with its floating exchange rate, agricultural commodity prices in Argentina have subsequently gained.

Argentine soybean area is projected to edge up to 10.1 million hectares in 2001-02 from the preceding year’s record of 10 million. But with slightly lower forecast yields, 2001-02 soybean output is forecast slip to 25.5 million tonnes, down 500,000. Even so, carryover supplies should be quite large, enabling Argentine soybean crush and exports to increase to 18.5 million tonnes and 7.6 million tonnes, respectively, from 17.75 million and 6 million.

Because maize prices in China were comparatively attractive last spring, China’s 2001 soybean area was estimated to decline by 7%. That decline plus drought is expected to shave China’s output by 400,000 tonnes, to 15.0 million.

Any loss of domestic soybean output would require another increase in China’s already massive imports, which are forecast rising to 14.0 million tonnes in 2001-02 from 12.5 million in 2000-01. And a very robust 17% increase in 2001-02 soybean meal consumption to 17.4 million tonnes is anticipated, in which case China would account for more than 40% of the world’s expected growth in soybean meal consumption next year.

Counter to soybean output, world sunflowerseed production in 2001-02 is expected to decline 3% to 22.1 million tonnes, which would make it the smallest since 1993-94. After two consecutive seasons of smaller harvests, global carryover stocks next season are estimated to be down by more than 60% from two years earlier. The shortfalls would cut world sunflowerseed exports by 12% to 2.9 million tonnes.

Comparatively better grain prices and high fertilizer costs have cut estimated 2001 Canadian canola area by 18% to 4.0 million hectares, which is the lowest in five years. A drought in Alberta and Saskatchewan further discouraged canola planting, and Canadian canola production is forecast to plunge by 1.3 million tonnes to 5.8 million.

Both China and India are anticipated to harvest larger rapeseed crops this year. Shifts of land from wheat and rice into rapeseed in China are seen producing a record harvest of 11.8 million tonnes. Consequently, China’s imports, mostly from Canada and Australia, would plummet to 1.0 million tonnes.