Brazil’s soybean harvest is well underway, and adjustments to the size of the soybean crop keep coming in.
Just this week, Brazil-based consultancy Agrural cut its production estimate by 2.1 million metric tons (mmt) from 152.9 mmt to 150.9 mmt.
Between Brazil and Argentina’s drought-impacted crops, the situation has the attention of the soybean market.
“I think South America has been a tremendous influence on the soybean market,” says Joe Vaclavik of Standard Grain. “On the soy complex, in particular, Argentina’s soybean crop is going to end up 20% to 30% below what we thought it may have been prior to the growing season. They’ve had what some people would say is the worst drought in 60 years.”
Vaclavik says the adjustments to Brazil’s crop this week created market chatter, but even with adjustments, it’s still a record crop.
“There was one well-followed private group that reduced its production estimate for the Brazilian soybean crop, and the Brazilian soybean crop is still going to be record large,” Vaclavik says. “That is something I think has helped to keep the old crop soybean market about $15 on the board. It’s probably helped the new crop bean market, and it probably helped the corn market to some extent. I think the Argentina weather story, in terms of the major producers, has probably been the biggest one the past couple of months.”
Andrew Jackson, a Southeast cash grain trader at Action Ag, says the Brazil story is what’s keeping a lid on prices, but it’s also about timing.
“If the Brazilian crop wasn’t so big, the Argentine story would have more legs than what it already does,” he says. “First of all, Brazil is going to have a lot of exportable supplies, and it’s going to be halfway about logistics. When it’s time for those beans to come to the market, it’s also time for them to come to export, which means it’s going to start cutting into our export window. The U.S. has to make hay when the sun shines. That time for us is December, January and February. Once we get past that window, it’s really tough for us to be competitive.”
How China and Ukraine Come Into Play
Vaclavik points out the situation with China is also creating angst. He thinks China doesn’t want to buy from the U.S., and they will only come to the U.S. for what they can’t source from Brazil.
They used to buy a lot of corn from Ukraine, but they can’t really do much of that anymore either,” Vaclavik says. “I think we’re going to be in this continued kind of cold war situation with China, the United States is in a proxy war with Russia and Russia is very closely tied to China.”
Vaclavik says the other issue putting a strain on the United States’ relationship with China is Taiwan. He says that’s related to microchips and semiconducters.
“This CHIPS Act that Biden signed last year kind of cuts China out of any sort of microchip made with U.S. technology, and that U.S. technology is the best technology. That’s the root of the Taiwan problem. That’s why Nancy Pelosi goes to visit Taiwan. I don’t see the tensions going away anytime soon.”
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