A look at Brazil, Argentina soybean sectors

South American soybean supplies will be available soon. Soybean harvest is underway in Brazil and a big crop is expected. Most people expect the availability of soybean and soybean product supplies from Brazil and Argentina to have a significant impact on U.S. exports during the last 4 to 5 months of the 2012/13 crop year. With that in mind, we decided to look at the usual distribution of the South American crops and the implications for demand for U.S. soybeans.

Large crops are expected in Brazil and Argentina. Currently USDA is forecasting a record 83.5 million tonne soybean crop in Brazil and a near record crop of 53 million tonnes in Argentina. So far in the 2012/13 crop year, U.S. soybean exports and crush have been running at a pace that cannot be sustained through the summer months. The theory is that U.S. exports of soybeans and soybean products will slow dramatically once the South American supplies hit the market.

Brazil typically exports about half of the soybeans produced and crushes the other half. About half of the soybean meal produced in Brazil is then also exported. In contrast only about 1/4th of the soybean oil produced is exported. Domestic soybean meal demand growth has slowed dramatically in recent years, falling from about 10 percent per year or more in the mid-2000s to around 3 percent per year recently.

Despite the huge increase in soybean production in Brazil this year (17 million tonnes), USDA forecasts only 1 2 million tonne increase in Brazil’s soybean exports and no increase in crush. The USDA forecast shows a 5.2 million tonne increase in soybean stocks in 2012/13. Clearly, the supplies of soybeans, meal and oil could be much larger than currently projected.

Argentina sells most of its crop as meal and oil. The increase in soybean production in Argentina year-over-year is 13 million tonnes, following the very poor crop of a year ago. USDA forecasts a 1.4 million tonne increase in Argentina’s soybean crush and a 3.5 million tonne increase in exports.

Argentina crushes most of the soybeans produced, an average of 78 percent for the 2005 through 2011 seasons compared to the 70 percent forecast for this year. If the 2012/13 crush was near the 78 percent, production of meal and oil would be about 9.5 percent above currently projected levels. Argentina exports nearly all of the meal produced, i.e. around 95 percent, and nearly 60 percent of the oil produced. A significant share of the exports, around 40 percent, falls in the April through July period.

Soybean area and production continue to increase at a rapid pace. Soybean area harvested is record high in both Brazil and Argentina at 27.5 million hectares and 19.5 million hectares respectively. In 2005/06 the totals were 22.2 million hectares in Brazil and 15.2 million hectares in Argentina. Over the last seven years these two countries have added nearly 24 million acres, an amount equal to soybean acreage in Illinois, Iowa and Indiana combined. Together they harvest about 50 percent more acres of soybeans than we do in the U.S.

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