Commodities 2024: Delay in Brazilian planting to boost US soybean exports in Q1 2024

The US soybean exports in the first quarter of 2024 are expected to get a boost from Brazil’s planting delay in the marketing year 2023-24, according to market sources, likely supporting the oilseed futures prices during the period.

“We expect strong momentum for the US soybean exports through Q1 2024 and up until the Brazilian harvest (likely delayed until March),” said Jack Larimer, senior research analyst at S&P Global Commodity Insights. “Due to slackened pace of soybean planting in Brazil, we expect the US to have higher-than-normal export sales during this part of the year (Q1 2024),” he said.

Typically, the US soybean exports start peaking in October-December and remains robust at least until mid-February. By late February, as the Brazilian soybean harvest gains traction, it’s cheaper oilseed shipments begin to dominate the global markets, largely replacing the US supplies.

Having said that, there are years when Brazil suffers harvest delays due to weather extremes, such as drought or deluge. This is when the US soybean exports typically step in to fill the supply gap and its sales extend well into March-April. MY 2023-24 seems to be one of those years when Brazil’s weather woes are likely to profit the US soybean farmers.

Brazil, world’s top soybean producer and exporter, has been struggling with El Nino-led weather extremes since October, which have affected its key oilseed producing states. As a result, the soybean planting progress in the country for MY 2023-24 has seen a delay of nearly two weeks compared to five-year average.

In fact, the pace of planting in drought-hit Mato Grosso lagged nearly a month compared with five-year average. Located in west-central part of Brazil, Mato Grosso is the country’s top soybean producer, accounting for a third of national output.

Unfortunately, for the Brazilian farmers, the El Nino impact is not just limited to Mato Grosso. The weather phenomenon has also severely impacted the neighboring states of Goias, Mato Grosso do Sul and Rondonia, leading to prolonged dryness in the region, which typically accounts for nearly half of Brazil’s soybean exports every year.

To make matters worse, southern Brazil is no better off either as El Nino-led torrential rains between October and early December have battered the farmlands. Waterlogged fields have slowed the sowing activities and stoked fears of rot, diseases, replantation, and delayed harvest.

El Niño is a weather phenomenon characterized by unusually warm ocean temperatures in the Equatorial Pacific, as opposed to La Niña, which is characterized by unusually cold ocean temperatures in the Equatorial Pacific, according to the National Oceanic and Atmospheric Administration. From the perspective of Brazil, El Niño typically brings heavy rains across the south, droughts in the north and uneven rainfall across the west-central areas — the country’s top soybean and corn producing region.

As both the US and Brazil vie for a pie in China’s soybeans market, 2024 promises to be a fruitful year for the two suppliers.

According to S&P Global estimates, China is forecast to import a record 101 million mt of soybeans in MY 2023-24. The USDA has gone a step further in its optimism and projected the imports at a whopping 102 million mt.

Brazil has had a lion’s share of China’s soybean imports in recent years at around 65%, while the US typically accounts for 25%. This trend is expected to continue in MY 2023-24.

“The imminent harvest delays in Brazil are likely to aid the US soybeans sales in Q1 2024. However, once the Brazilian and other South American soybeans hit the market (March-April-May), we forecast US exports to fall off a cliff,” Larimer said. “This puts our US soybeans export forecast for MY 2023-24 above 1.7 billion bushels (47.9 million mt), down 11.6% on the year,” he said.

Echoing this sentiment, China-based crushers and traders see more demand for the Brazilian oilseed as the year 2024 wears on.

“Brazil’s MY 2023-24 soybean harvest, while delayed, is likely to be around 158 million mt, making it extremely competitive against the US-origin oilseed,” a China-based trader said.

In 2023, backed by a record harvest of 154.6 million mt, Brazil’s soybeans were sold at steep discounts of $20-$40/mt against the US for most of the year until late August and this trend is very likely to be repeated in 2024. The South American nation is forecast for produce 158 million mt in MY 2023-24, according to S&P Analytics.

“Barring a disaster [in Brazil’s harvest], they’re going to have another humongous crop,” a US-based soybean trader said. “Delayed planting there [in Brazil] may give the US a small window to export early next year, but other than that, Brazil is likely to dominate the soybean export market in 2024, he said.

S&P Global has adopted a similar view and sees Brazil’s MY 2023-24 soybeans exports at an all-time high 101.5 million mt.

Overall, the soybeans outlook for Q1 2024 calls for strong US exports through the beginning of March as Brazil’s crop (planting) is running 2-3 weeks behind, Larimer said. “We expect China’s oilseed demand to primarily favor the US, though high prices will gradually shift that demand to Brazil [Q2-Q3 2024],” he said.

So, although the Brazilian soybean exports look bullish next year, there is some caution in the air for global trade of the yellow oilseed, which could dampen the optimism.

“We think the global soybean demand in 2024 will largely be stagnant, mostly impacted by the decline in China’s animal [mostly hogs] numbers and its slowing economy,” Larimer said.

The US marketing year 2023-24 for soybeans spans between Sept. 1, 2023, and Aug. 31, 2024, while Brazil’s local marketing year 2023-24 starts on Jan. 1, 2024, and ends Dec. 31, 2024.

Tags: Brazil, prices, soybeans, US, futures, Market, exports, harvest