Chinese soybean imports keep price hopes alive for new harvest

Despite hopes for a decline in Brazilian corn and soybean harvests ahead of Friday’s global agricultural supply and demand report, the USDA made only minor reductions in the soybean harvest Brazilian exports for 2023/24, while increasing the volume of planned Brazilian soybean exports.

But a sharp increase in Chinese soybean import volumes (110 million bushels) helped reverse morning losses for new crop soybean futures and will largely consume the additional Brazilian exportable supplies reported in WASDE from March 2024.

Corn prices remained largely unchanged from the previous session’s losses, as increased export volumes from Argentina and Ukraine kept global corn supplies plentiful. Wheat prices gained momentum after the USDA increased wheat import volumes to buyers in Southeast Asia by almost 7%.

“March WASDE reports are generally quiet, and today’s report is no exception,” according to Jacqueline Holland, grain market analyst at Farm Futures. “The Prospective Plantings report, expected later this month, will likely provide more pricing activity, particularly for new crop futures.”

But

The USDA made no changes to its ending stock estimates in today’s report compared to February’s projections, leaving that figure at 2.172 billion bushels. The agency lowered the seasonal average to $4.75 per bushel “based on prices observed to date.”

South American production trends showed that Argentina’s production potential increased from 2.165 billion bushels in February to 2.205 billion bushels. In Brazil, production estimates remained stable at 4.882 billion bushels.

Global corn production in 2023/24 fell to 12.584 billion bushels, which was also slightly below the average trade forecast of 12.614 billion bushels. Declines were seen in South Africa, Ukraine, Mexico, Venezuela and Russia.

Soy

As with corn, the USDA left soybean supply and utilization estimates steady from February. That left ending stocks steady at 315 million bushels, which was slightly below the average trade forecast of 319 million bushels.

The season average price for soybeans and soybean meal also remained stable this month, while soybean oil prices fell 2 cents to 49 cents per pound.

In South America, Argentina’s production estimates remained steady at 1.837 billion bushels, while Brazilian soybean production fell slightly to 5.695 billion bushels.

“The market was hoping that the USDA would more significantly reduce Brazilian soybean production in 2023/24,” Holland said. “In recent weeks, some of my analyst friends have told me that their Brazilian agricultural sources have remained silent on yields during the harvest season. And if feedback from the field has taught me anything, we keep quiet when we are on the right track to obtain good returns!

The USDA also tends to be cautious when revising South American production numbers, particularly if weather conditions haven’t been erratic enough to warrant a significant revision, Holland adds.

“Thus, the 37 million bushel (1 MMT) reduction in Brazil’s crop reflects early season dry conditions, but the USDA’s 110 million bushel (3 MMT) reduction served to remind markets that Slightly lower yields will have no impact. Brazilian exports will accelerate in the coming weeks and months,” she says. “The voices that have announced a drop in Brazilian soybean yields in recent weeks are generally those of farmer groups, who have a financial interest in seeing lower yields, because this increases prices on the farm. These voices only confuse farmers, as traders have clearly already priced decent yields of Brazilian soybeans before today’s report.”

Farmers are lucky that the USDA increased China’s soybean import volumes to a new record of 3.858 billion bushels (105 MMT) in the wake of increased Brazilian soybean exports, Holland also points out. The USDA also backdated China’s soybean import volumes for 2022/23, raising them from 134 million bushels (3.65 MMT) to 3.839 billion bushels (104.5 MMT).

“Over the next six months, Brazilian soybeans are expected to dominate the international market,” she concludes. “This outlook has kept old-crop soybean prices largely unchanged or even slightly lower following the release of the WASDE report. But if China continues to buy oilseeds and feed grains in rapid quantities (China has reserved several large purchases of U.S. and Ukrainian feed grains over the past week), U.S. soybean producers could see more profit opportunities in the export market this fall.

Global ending stocks fell from 4.263 billion bushels in February to 4.198 billion bushels this month, reflecting analysts’ expectations.

Wheat

Ending stocks of wheat increased slightly to 673 million bushels from 658 million bushels in February. In contrast, analysts expected a slight decline, offering an average trade estimate of 657 million bushels. That leaves ending stocks up 18% year over year so far.

The USDA also lowered the season’s average farm price by a nickel, to $7.15 per bushel.

Globally, ending stocks fell from 9.532 billion bushels in February to 9.509 billion bushels in March. This was slightly below the estimated trade average of 9.520 billion bushels.

“USDA made many changes to the global wheat balance sheet at the March 2024 WASDE,” Holland said. “Increased Russian wheat production by 2023, as well as Ukrainian and Australian export volumes, have been largely neglected in favor of large increases in imports (62 million bushels, 1.7 MMT) from of the Southeast Asian bloc. »

Price increases were limited by lower import volumes from buyers in the Middle East and China, Holland adds. And while additional purchases in Southeast Asia have helped reduce global closing wheat stocks for 2023/24, there are still reasons for concern closer to home, she points out.

“American wheat export volumes continue to struggle to compete with cheaper supplies from the Black Sea and Argentina,” says Holland. “As a result, the USDA reduced the 2023/24 U.S. wheat export outlook by an additional 15 million bushels, bringing the total to 710 million bushels. This is the smallest volume of U.S. wheat exported since 1971 – just before the Soviet grain theft. Russia overtook the United States as the world’s largest wheat exporter between 2015 and 2017, but this latest shift indicates that the end of an era for U.S. wheat exports has likely already arrived.”