Porto Alegre, July 18, 2023 – The expected July supply and demand report from the US Department of Agriculture (USDA), released last Wednesday (12), surprised the market, bringing great volatility to Chicago. Although USDA confirmed the bias of cuts in production and US stocks in the 2023/24 season, the size of the cuts was surprising by being lower than expected by the market. While the market was expecting more significant cuts, USDA brought fewer sharp cuts, which made the report bearish in a way. The smaller-than-expected cuts led to a surprising maintenance of the expected average yield for US crops, something that apparently does not make sense given that crop conditions deteriorated significantly since June. Thus, the market expected a reduction in average yield of at least 0.5 bushels per acre. But USDA continues to point to a yield of 52 bushels per acre, which, if confirmed, will be the highest average yield in US history. In any case, the cuts in production and stocks do bring a bullish tone to the market, which also understands that USDA could bring a cut in yield in the August report, if the climate does not improve further. Even so, the futures market in Chicago registered a sharp decline after this July report. However, we understand that the negative movement was isolated, despite being accentuated. The market is once again following the weather over the growing belt in the coming weeks, and a less moist week forecast for the next few days tends to prompt some support to futures contracts.
USDA indicated that the US soybean crop is expected to reach 4.300 bln bushels in 2023/24, equivalent to 117.03 mln tons. Yield was put at 52 bushels per acre. The number was above the market forecast, which was 4.250 bln bushels, or 115.66 mln tons. In the previous report, the forecast was 4.510 bln bushels or 122.74 mln tons.
Ending stocks are projected at 300 mln bushels or 8.16 mln tons. The market was betting on a carryover of 206 mln bushels or 5.61 mln tons. In June, the number was 350 mln bushels or 9.53 mln tons. USDA reduced the crush forecast from 2.310 bln (62.87 mln tons) to 2.300 bln bushels (62.59 mln tons). Exports were cut from 1.975 bln (53.75 mln tons) to 1.850 bln bushels (50.35 mln tons).
For the 2022/23 season, USDA maintained its production estimate at 4.276 bln bushels or 116.37 mln tons. Ending stocks were estimated at 255 bln bushels – 6.94 mln tons. The market projected stocks of 235 bln or 6.39 mln.
As for the world picture, the report projected the world soybean output in 2023/24 at 405.31 mln tons. In June, the forecast was 410.7 mln. Ending stocks were reduced from 123.34 to 120.98 mln tons. The market expected 120.4 mln tons.
USDA projected the US crop at 117.03 mln tons, as already mentioned. The Brazilian crop was projected at 163 mln tons. For Argentina, the forecast is for the production of 48 mln tons. China must import 99 mln tons.
For the 2022/23 season, USDA estimated a global crop of 369.72 mln tons. For the United States, the estimate is 116.38 mln tons. Brazil’s crop was projected at 156 mln and Argentina’s at 25 mln tons. The market was betting on 156.2 mln for Brazil and 23.6 mln for Argentina.
Global stocks are estimated at 102.9 mln tons, while the market was betting on 101.3 mln tons.
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