Commodities 2022: US soybean supply set to soar on higher acreage

The US soybeans supply in marketing year 2022-23 (September-August) is set to soar amid higher acreage transfer from fertilizer-intensive corn crop.

With the fertilizer price indexes hitting record highs, the input cost pressure on fertilizer-intensive corn planting will be markedly higher than soybeans in 2022, analysts said. As a result, there could be a notable shift in planting decisions in favor of soybeans when the next planting window opens in May.

The current uptick in fertilizer prices is likely to continue in 2022 as easing coronavirus pandemic restrictions are likely to sustain global economic recovery and boost oil and natural gas prices.

Natural gas is a key input in the production of nitrogen-based fertilizers. And since corn is a fertilizer-intensive crop, its returns on planting are expected to be hit the hardest in 2022.

“For US farmers’ cost of production budget, fertilizer is a large component when it comes to corn, as producers need to treat fields during the fall ahead of winter and again in the spring after plantings,” said Terry Reilly, senior commodity analyst at exchange brokerage group Futures International.

As fertilizer cost accounts for almost 40% of the operating cost for the US corn farmers every year, it is expected that a sizable number of US farmers might opt for soybeans planting instead of bearing the high operating cost of corn planting.

The higher fertilizer prices will see farmers switching corn crops to soybeans (which naturally nitrogenate the soil) leading to lesser corn acres planted in 2022, S&P Global Platts Analytics had said earlier.

Soybean harvested area is forecast at 36.1 million hectares in 2022-23, up 1.2 million hectares year on year, while the corn acreage forecast was trimmed by 1.2 million hectares to 33.2 million hectares, Platts Analytics said.

“We see a minimum of 1.25 million-hectare shift from corn to soybeans in 2022-23,” said Pete Meyer, head of grain and oilseed analytics at S&P Global Platts.

The US soybean exports share to China could see a decline in 2022 despite Platts Analytics forecast of record imports by the Asian nation in 2021-22 and 2022-23 at 102 million mt and 104 million mt, respectively.

“The key challenges will be how much of US soybeans could be exported to China,” Terry said. “With Brazil’s soybean harvest starting as early as mid-January, US exports could significantly slow around that time,” Terry said.

The seasonality of US soybean export market typically extends from harvest time in October through February, when fresh inbound raw beans volume from South America enters the market at very competitive pricing.

World’s largest soybean supplier – Brazil — continues to break production records each year and the same is expected in 2021-22, when the output is forecast at an all-time high 144 million mt, which is almost 24 million mt above the US output, according to the US Department of Agriculture’s latest World Agricultural Supply and Demand Estimates report, released Dec. 9.

Brazil is also projected to export a record 94 million mt of soybeans in 2021-22, compared with 56 million mt from the US, the USDA said.

Both Brazil and the US compete for soybean import demand from China, the world’s largest beans purchaser.

US-China relation is expected to have a major say in the performance of US soybean exports in 2022.

“If there is any challenge to China’s soybean trade with North America, it might be the Sino-US relations,” Shanghai-based agricultural consultancy JCI China told S&P Global Platts.

US domestic crush in 2021-22 is projected at 60.3 million mt, according to Futures international estimates.

“Note that our crush estimate is well above USDA’s (59.6 million mt) given expansion, healthy crush margins and the need to crush to get to the soybean oil amid feedstock for renewable biofuel demand,” Terry said.

New investments into soybean crush facilities to bolster US biofuel production were made in 2021. However, the proposed crushing units are unlikely to be operational before 2023.

Higher soybean oil prices have not only helped keep US domestic crush volumes high, but they have also reduced export volumes.

Having said that, trade has been following recent sales to India, and the nation’s need for vegetable oils for food use will be something to watch in the next year.

US soybean prices in 2022 are likely to slide a bit as ample supplies coupled with expectations for a large US soy planted area for 2022-23 could pressure prices.

“I look for prices to trend lower during the remainder of the 2021-22 crop season,” Terry said. “I see March soybeans in a $11.00 and $13.50 range, and November in $10.50 and $13.25 range,” he said.

S&P Global Platts

Tags: corn, planting, price, Brazil, soybeans, US, crop, fertilizer, fertilizer-intensive corn