Soybean & 2021 Expectations

Expectations for an increase in soybean production continued in March. The harvest, which started in southern hemisphere countries such as Brazil and Argentina, which are the biggest exporters, will clarify the expectations for the season. Due to the current environment and expectations, it indicates that soybean prices, which have shown a slightly more flat course since January, will continue in this line for a while. The most promising development for prices will be the increase in production announced by IGC in its 2021/22 projection.

Feed Raw Materials: SOYBEAN & 2021 EXPECTATIONSBy Bahadır Büyükkılıç
Soybean, which has the highest protein value among oilseeds, is a versatile plant with its structure that does not contain cholesterol and saturated fats, and high-quality protein content. Soybean, which is used extensively in both animal and human nutrition, is generally extruded, separated into oil and pulp. Soybean meal is used extensively, especially in the production of poultry feed and cattle feed.

Soybean meal, which is used to balance the rations of farm animals and to complete the amino acid deficits, is a product with a high degree of digestion. As it is a major source of protein in the feed industry all over the world, it is a feed raw material strategically traded every day of the year.

In its latest report published in March by the International Grain Council (IGC), it is estimated that world soybean production, which was 363 million tons in the 2018/19 season, decreased by 25 million tons in the 2019/20 season and stood at 338 million tons. However, the increase expectation for the 2020/21 season still continues. The latest forecast made by the IGC is that the production will be 361 million tons in the current season.

The IGC also announced the projection for the 2021/22 season in March, unlike the previous months. The IGC’s projection for the next season marks a record increase with 383 million tons. Likewise, the March report of the US Department of Agriculture (USDA) Foreign Agricultural Service provides the same data as the IGC report and supports an increase expectation.

However, the increase in production is not enough to meet the demand for soybeans. According to the IGC data, world soybean consumption, which was 346 million tons in the 2018/19 season, reached 351 million tons in the 2019/20 season. This means 13 million tons more consumption than the production amount in the same period. Likewise, forecasts for the 2020/21 season point out that the consumption will be 367 million tons, more than the production (by 6 million tons). The gap between production and consumption means that existing stocks are falling. However, the 2021/22 projection of the IGC is promising. According to the projection, production in the next season will be 5 million tons more than consumption, which will contribute to the increase in stocks again.

The American continent accounts for more than 85 percent of the world’s soybean production. Brazil is the largest soybean producer in both the region and the world. According to the USDA data; Brazil produced 128.5 million tons of soybeans in the 2019/20 season.

The country is expected to increase its production to 134 million tons in the next season. In global production, the USA follows Brazil with 96.6 million tons. Production in the USA is expected to reach 112.5 million tons in the current season. Argentina is the third-largest soybean producer in the world with 48.8 million tons. Production in the country is expected to decline to 47.5 million tons in the new season. Argentina is followed by China with 48,8 million tons, Paraguay with 9,9 million tons, India with 9,3 million tons, and Canada with 6,1 million tons.

According to the IGC report, the world soybean trade, which was 152 million tons in the 2018/19 season, reached 170 million tons in the 2019/20 season. The IGC estimates that the trade will remain around 170 million tons in the 2020/21 season.

The 2021/22 projection foresees an increase of 3 million tons (173 million tons) in trade. The USDA’s March report draws a similar picture and predicts that the trade, which was 165 million tons in the 2019/20 season, will be around 169 million tons in the 2020/21 season.

The ranking of the leading countries in the international soybean trade did not change much compared to previous years. The largest producers also stand out in exports. Brazil, the USA, Argentina, Paraguay, and Canada accounted for more than 96 percent of global soybean exports in the 2019/20 season. Brazil, which exported 92.1 million tons last season, is expected to reduce its export amount to 85 million tons in the current season.

In the same period, it seems that the USA will close Brazil’s gap in the world market. It is estimated that the USA will increase its total exports to 61.2 million tons with an export increase of 15.5 million tons. Argentina’s exports are expected to decline to 7 million tons in the 2020/21 season.

On the import side, China, the European Union, and Mexico stand out. Ranking first with 98.5 million tons in global soybean imports in the 2019/20 season, China is estimated to import 100 million tons in the 2020/21 season. While the imports by the European Union countries will remain around 15 million tons, Mexico will continue to import around 6 million tons.

Soybean export prices, which hovered around $ 340 per ton at the beginning of 2020, showed a rapid increase throughout the year due to the decline in production.

In the last quarter of the year, prices approaching 540 dollars per ton in Brazil, 500 dollars in Argentina and 480 dollars in the USA closed the year between 460-500 dollars. Soybean prices, which rose to $ 580 in Argentina in the first weeks of 2021, continued to follow a slightly more horizontal course in the 500-540 range in the following weeks.

It seems likely that the flat course in prices will continue for a while due to the increasing production expectations and the beginning of the harvest in countries in the southern hemisphere such as Brazil and Argentina, which are the biggest exporters. The most promising development for prices will be the increase announced by the IGC in its 2021/22 projection. If the projections continue in this way in the coming months, price stability in soy and some decline will likely be achieved. However, the demand for soy products such as biodiesel, oil and pulp, and harvest results in the southern hemisphere remains important as additional determinants of prices.

International Grains Council (IGC), Grain Market Report, 25/03/2021
United States Department of Agriculture Foreign Agricultural Service (USDA), Oilseeds: World Markets and Trade Report, March 2021