The 2017/18 soybean-marketing year has officially begun in the United
States, with production expected to beat initial estimates. In Argentina,
soybean sales take a pause on the expectation of better prices and changes
to export taxes.
According to a recent survey held by INTL-FCStone, traders expect in
average US soybean yields around 3.35 tons per hectare, resulting in 120.2
million tons of productions. This number surpasses USDA’s latest estimate
of 119.2 million tons.
As August went by, these expectations resulted on a significant drop in
soybean prices. Reference prices set by Rosario Board of Trade’s Cereal
Arbitration Chamber fell 2% to ARS 4,305 per ton, although a weaker peso
held prices stable in dollar terms, closing the month around USD 250 per
These prices hardly seduce sellers, resulting in farmers keeping hold of
their production for as long as possible. It is expected among producers
that the progressive reduction of export taxes on soybeans, which is
scheduled to start on January 2018, will help support local prices, whereas
the recent strengthening of the peso has resulted in another incentive for
the wait and see strategy.
According to official data from the Ministry of Agroindustry, total soybean
purchases remain behind schedule, with 57% of the expected production
having been bought vs. a five-year average of 64%. We must also highlight
the fact that as of August 23, 48% of total purchases have yet to receive
price fixings, 9 percentage points above the five year average.
So far, this abnormal yet expected behavior has not translated to the
2017/18 marketing year. Exporters and processing plants have already
purchased 1.7 million tons, about 10% more than they had in average bought
over the past five years. However, only 30% of these purchases have been
made at a fixed-price.
Soybean crush and export margins have weakened over the past few weeks, as
shown in the following chart. With such weak profits, it is hard to think
about a sudden reversal in prices unless conditions change.
Low trading activity has resulted in expected soybean consumption to fall
from initial estimates, with ending stocks expected around 15 million tons.
Prospective soybean plantings for the 2017/18 marketing year are expected
at 18.7 million hectares, which would represent a drop of 300,000 hectares
from the previous year. If we assume yields to be trend (3.11 tons per
hectare), total production will barely surpass 55 million tons.
This drop would represent a 4% fall in production, but ending stocks would
more than compensate such decrease, giving way to a rise in total supply,
which would exceed 72 million tons, setting a new record according to our
estimates. Even if a rise in trading activity is expected in light of
export tax cuts, demand must pick up to keep pace with ever increasing
As of late, the Brazilian late corn crop, better known as safrinha, which
represents 69% of its production, has led the global corn market.
Throughout August, Brazil exported 5.4 million tons of corn, 1 million more
than its record for that month set in 2015. The following chart, based on
Williams Lineup data, summarizes Brazil’s monthly corn exports since
January 2015, including expected exports for next month.
The jump in corn production during the 2016/17 marketing year took place
thanks to favorable weather conditions for both crop development and
harvest, as well as an increase in plantings due to relatively high prices.
According to CONAB, a 9.7% increase in planted area and yields around 5.56
tons per hectare resulted in total production of about 97.2 million tons.
On the local grain market, corn has kept some interest from sellers in the
ARS 2,300 to ARS 2,350 per ton price range. On the other hand, USD 142 per
ton bids for new crop corn remain unattractive. Export purchases have
reached nearly 19 million tons; about 3 million tons more than was acquired
by the same time last year. However, this rise is mostly related to an
increase in production given that the ratio of purchases to estimated
production remains relatively unchanged