Sep 03, 2020

Soy Stocks Tight in Brazil, may be Tight Again Second Half of 2021

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

Available soybean supplies in Brazil are currently very tight and they may be tight again during the second half of 2021. Brazil front-loaded their soybean exports in early 2020 and now end-users have been forced to importing soybeans from Paraguay to meet the domestic demand.

By the end of August, Brazil had already imported approximately 500,000 tons of soybeans from Paraguay and that is expected to go even higher before the 2020/21 crop becomes available in early 2021. This compares to 150,000 tons of soybeans imported from Paraguay for all of 2019.

Given the current supply shortage, some analysts are predicting that domestic soybean prices in Brazil could reach R$ 140.00 per sack (approximately $12.00 per bushel) by the end of the year.

Brazilian farmers will start planting their 2020/21 soybeans over the next couple of weeks and they have been very aggressive in forward contracting their anticipated production. Nationwide, it is estimated that farmers have already sold 55% of their 2020/21 production with as much as 60% sold in areas of Mato Grosso, Goias, and northeastern Brazil. By the time the new crop starts to be harvested in early January, 70% or more of the production may have already been sold.

This then raises the possibility that domestic soybean supplies could once again become very tight during the second half of 2021. Domestic demand for soybean meal from the livestock sector is expected to remain very strong in 2021. Soybean oil will also be in high demand as Brazil moves from 12% vegetable oil in biodiesel (B12) to 13% (B13) in March of 2021. Eighty percent of the vegetable oil used to make biodiesel in Brazil is soybean oil.

Conab recently estimated that Brazil would produce 133.5 million tons of soybeans in 2020/21, which is up 9 million tons or 7% compared to 2019/20. Conab estimated that Brazilian farmers would increase their 2020/21 soybean acreage by 3% and that the nationwide soybean yield would increase to 52.5 bu/ac. The increased production will depend on the weather during the growing season and currently Brazil is expected to have a dryer than normal planting season due to a mild La Nina.