USDA significantly cuts its soybean supply forecasts for Brazil and Argentina

RIO DE JANEIRO, BRAZIL – At the beginning of this year, all eyes have been on South America and the severe drought hurting crop performance and grain production. The United States Department of Agriculture (USDA) significantly cut its soybean supply forecasts for Brazil and Argentina in its latest report. Brazil’s Conab, Argentina‘s Buenos Aires Grain Exchanges (BAGE), and Rosario (BCR) have also reduced their crop estimates, reports BRS Dry Bulk Weekly.

The USDA lowered its production forecast from 144 million tons to 139 million, while Conab reduced its projection from 142.8 million tons to 140.5 million. Many farmers and analysts are even more pessimistic, with alternative projections ranging from 135 million tons to 131 million tons.

USDA’s export forecasts remain virtually unchanged, mainly due to its lower ending stocks projections. In addition, soybean harvest in Brazil’s second-largest producing region, Rio Grande do Sul, will take place in April, where the crop could recover with regular rains in the coming months.

As for corn, the BCR has cut its latest production forecast for Argentina by 8 million tons, which now stands at 48 million tons due to the prevailing drought. It is down from 52 million tons in the previous 2020-21 season. According to the BAGE report, as of January 12, about 87% of Argentina’s corn planting is complete, compared with 90.9% around the same period in 2020-21.

Argentina’s early corn crop is generally planted in September-October and harvested in April-May, while the late corn crop is planted in December-January and harvested in June-July.

Drought conditions are also affecting Brazil’s first-crop corn production. As the country is still emerging from severe crop losses suffered last year, the overall corn supply in South America is likely to be reduced in the near term. However, the country’s second-crop corn is currently being planted and is less likely to be negatively affected by the drought. As a result, Conab estimates that second-crop corn production will be 86.3 million tons, well above the first-crop production of 24.8 million tons.

Rains have arrived in South America this week, especially in central and eastern Brazil areas. More rainfall is expected in the coming weeks, which should help alleviate concerns about damaged production. The outlook for a higher European Community Shipowners’ Association (ECSA) grain export season remains unchanged.