September 19, 2023


US Midwest weather inhibits American soybean output - and to Brazil's benefit




A recent report by LMC International Ltd. shed light on the US soybean sector: the industry's total economic impact on the American economy averaged US$124 billion, including US$85.7 billion from soy production and US$9.8 billion from soybean processing in the crop years from 2019/20 to 2021/22.


This amount tallies what the president of the National Oilseed Processors Association (which commissioned the study) described as "substantial" economic contributions by the US soybean processing and refining sectors.


According to Meagan Kaiser, the chair of the United Soybean Board (another backer of the study), the report — known as "The Economic Impact of the U.S. Soybeans & End Products on the U.S. Economy"— "allows soy as an often invisible ingredient to become a visible contribution and sustainable solution for our future."


But, can the US produce enough soybeans to realise bountiful economic gains for the next crop season? This answer hinges on "weather-driven" markets for soybean and corn which "have rapidly fluctuated since early May amid weather concerns," S&P Global stated in a June 30 report.


"Both soybean and corn crops in the US for MY 2023-24 have been under dryness stress for the better part of May and June, leading to a notable decline in crop conditions, especially in the eastern Corn Belt," the report added.


In another report released on the same day, the United States Department of Agriculture (USDA) revealed that for marketing 2023-24 (September-August), estimates for soybean acreage were significantly lower from March. Referring to USDA data, S&P Global pointed out that  "Soybeans planted area has been estimated 4.6% lower from the March report to 83.5 million acres, which is also 4.5% lower on the year."


By this month, the USDA has cut its forecast for US soybean production, yield and ending stocks this year in its September Crop Production and World Agricultural Supply and Demand Estimates reports. Soybean production was forecast at 4,146,036,000 bushels (112,836.65 tonnes), a 1% drop from 4,205,450,000 bushels (114,453.63 tonnes) forecast in August and down 0.7% from 4,276,123,000 bushels (116,377.04 tonnes) in 2022.


Weather looms as the chief factor. "We're seeing the effects of August weather reflected in these numbers, a smaller decline in corn than soybeans, but that's to be expected," said Bill Lapp, founder and president of Advanced Economic Solutions. Indeed, as a recent Iowa Agribusiness Radio Network pointed out most soybean crops are still in the critical pod-setting phase that depends on August moisture. Stubbornly dry conditions are hindering yield and raising concerns about the availability of supplies.


"Corn is more of a July crop, soybeans more an August crop in terms of when crops can be most adversely impacted by disadvantageous climatological conditions," Lapp added.


However, while the USDA previously revealed — concerning marketing 2023-24 (September-August) — much lower estimates for soybean acreage from March in late June, it looks like more soybean acres were planted this year "than previously thought," he noted.


Other than weather, man-made events can potentially put a damper on the US soybean market. Such a case was a September 10 fire and explosion incident at an Archer-Daniels-Midland (ADM) facility in Decatur, Illinois, which has seriously curtailed crop processing operations, including corn and soybeans.


The extended downtime of the plant could exert downward pressure on crop prices, Reuters reported. This development arrived at a juncture when US Midwest farmers were preparing to harvest corn and soybeans. Falling export demand has only exacerbated a situation of lower US crop prices.


On the flipside, soybeans in the Midwest could risk a sharp spike in prices if the weather has its way. "If hot and dry conditions continue in the Midwest and yield loss for soybeans increases, the US soybean supply will tighten further," Tanner Ehmke, lead grains and oilseeds economist for CoBank, told the Iowa Agribusiness Radio Network. "That will result in stronger interior cash basis and lower exports."


The trouble for Midwest soybean only seems to grow as heat and dryness humbled yield estimates, which plunged 3.7% from May estimates to 49.1 bushels/acre by September, based on USDA data.


Despite the tremendous economic value of soybean as boasted by the LMC International report, the reality is that US soybean output has stagnated "over the last 10 years averaging 113 million (tonnes) owing to limited acreage expansion and mostly unfavourable weather conditions," S&P Global stated.


Meanwhile, "The US' loss is Brazil's gain," remarked Peter Meyer, S&P Global's crops and feedstocks economist. In terms of soybean output, Brazil has managed to overtake the US in the past decade.  


The USDA's Foreign Agricultural Service foresaw the South American nation's soybean exports to experience continuing strong growth next year.


"While in MY 2014-15, Brazil's soybean production was seen at 97.1 million (tonnes) on an area of 79 million acres, it is forecast to jump 68% from then, to 163 million (tonnes) in MY 2023-24 on 112.7 million acreage," S&P Global said, citing USDA data.

- Terry Tan, eFeedLink

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