Just How Big is Brazil's Soybean Crop this Year?

Commodity prices remain strong, but there’s growing concern about if these prices can hold. Farmers’ moods seem to be shifting at grower meetings this winter, with the top concern being the same: can commodity prices remain at these levels, and what if input prices continue to climb up?

The biggest question right now is South America. Argentina hasn’t seen ideal weather this growing season, but it’s a different story for Brazil. Dan Basse of AgResource Company just returned from Brazil where he got a first-hand look at Brazil’s crops during a crop tour last week. So, just how good is Brazil’s crop this year?

“It’s really good,” says Basse. “It's a record crop. If you think about Brazil, we think the crop is all of 154 million tonnes, that's 1 million tonnes above the USDA, and as harvest is starting in Mato Grosso, the yield data that's coming through, they’re about 9% harvested today, and it’s a record. So as we go south, it'll be a little bit more questionable of Rio Grande, which has been too dry, but the northern half of Brazil is really good.”

Is Brazil's Record Crop Baked In? 

It's not a secret Brazil’s crop had the potential to set a record this year. With Basse’s first-hand look, is the impressive Brazil crop baked into the market? Matt Bennett of AgMarket.net thinks that's the case.

“This has been more of a soybean meal story than anything, because Argentina was dry,” says Bennett. “And so obviously, Argentina produces quite a bit of soybean meal, usually 50% or more out on the world markets. So you saw the soybean meal take off and go around December 1, the bean market was heavily supported by that.”

Bennett says when you step back and look at the bigger picture, South America’s crop production will be higher this year.

“You have to understand we're building world stocks, even at a time when Argentina had really tough weather patterns,” points out Bennett. “So, you can't get too bulled up just based on Argentine weather.”

Will Fertilizer Prices Continue to Fall? 

Both Bennett and Basse think South America’s crop, along with more rain entering the picture in the U.S., is pointing toward a more bearish outlook for commodity prices. But what about inputs? Sam Taylor with Rabobank says considering natural gas prices have fallen so rapidly, it looks like fertilizer prices could also see more downward pressure.

“I think that's our bias,” says Taylor. “Our best case scenario is that you still see some downward pricing momentum in the potash and the phosphate market. Nitrogen is always going to be a little bit of a wild card probably geared towards some downward pricing pressure in the first half of the year with that unknown about what happens in the European market with regard to energy prices, potentially causing some kind of volatility at some point.”

Taylor points out Brazil isn’t only an important market to watch for commodity prices. The country also is a key for the fertilizer markets.

“As with everything we are waiting on the Brazilian market,” says Taylor. “Brazilian pricing for fertilizers tends to be a little bit of a lead indicator to global prices, primarily because of their import needs relative to other geographies. So, while there's downward pricing momentum near term and at the moment, depending on the demand out of Brazil, we could see some flattening or some kind of correction. But I think the bias would still be to some double-digit downward price and momentum over the coming months.”

Get Rid of Your Old Crop

Even with the uncertainty of where input prices will go, Basse encourages farmers to get rid of old crop and make a move to be sold out of both corn and soybeans in 2022.

“I don't see any reason to be storing old crop corn and soy,” says Basse. “That being said, I think we need to think ahead to 2023. In the last two years, it paid to be relatively bullish. And that was for demand reasons. This was a supplied rally. This is because of Argentina and a USDA estimate that was lower than expected. We think that supply peak has come in. And unless somebody else has another weather problem, I think selling December corn between $6 and $6.20 of next year, and November beans at $13.80 to $14.20, makes a lot of sense.”

Read More: 

Soybean Harvest Is Just Beginning in Brazil. Here’s What the Crop Looks Like

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