Brazil to produce 141 million mt soybeans in 2021-22 on record acreage: USDA FAS

Brazil is forecast to produce an all-time high soybean volume of 141 million mt in 2021-22 marketing year (February 2022–January 2023) on record acreage of 40 million hectares, according to the US Department of Agriculture’s Foreign Agricultural Service, which is likely to pressure US-origin soybean demand next season.

Soybean expansion is forecast on current market conditions and trends — including strong demand, high prices and a favorable exchange rate, FAS said. All these conditions are expected to persist into the 2021-22 season, it said in the report released April 6.

Brazil is the leading producer and exporter of soybeans, accounting for more than one-third of the world’s soybean production.

A key factor that will drive the expansion of planted area next season and beyond is the availability of arable land, FAS said. Brazil’s National Supply Company CONAB estimates that over the last five seasons, Brazil’s cumulative soybean planted area rose almost 13%, or by 4.55 million hectares.

The Mato Grosso Institute of Agricultural Economics (IMEA) estimates that by 2030, soybean planted area in Mato Grosso will grow by over 40% to 14.79 million ha, up from just over 10.3 million ha in 2021. In the 2021-22 season, the soybean planting area in Mato Grosso — Brazil’s top soy supplier — will expand about 3% on the year, FAS said.

Robust Demand

The Brazilian soybean farmers will continue to get support from weak domestic currency, fueling the export boom, market analysts said. Domestic demand for oilseeds is expected to grow as well, with rising consumption of both oil and meal.

The global soybean demand will likely continue to rise exponentially, as the commodity is used in food, feed, and fuel, FAS said citing sources. The Brazilian market anticipates that soybeans will be increasingly used in the production of biodiesel with the growing push for sustainable, renewable energy sources, it said.

At the same time, rising meat consumption is expected to create additional feed demand.

In China and Europe — key soybean importers — despite the expected continuing economic slowdown, meat consumption is not expected to suffer a dramatic downturn, FAS said.

China has been the primary driver of Brazil’s strong soy export sales in recent years and the Asian nation is likely to remain Brazil’s top oilseed purchaser in coming years.

China is unlikely to significantly pull back on purchases of Brazilian soybeans, because of established relationships, and because of the inherently less politically charged relationship between Brasilia and Beijing, FAS said.

Favorable Exchange Rate

Due to the pandemic-induced economic recession, the Brazilian currency, the real (BRL) shed more than 30% of its value on the year in 2020.

Most analysts currently forecast that the Brazilian real will remain weak over the next two years, as Brazil’s economy continues to be bogged down by the pandemic, a slow vaccination campaign and limited government resources, FAS said.

The steep devaluation of the real has had a positive impact on Brazilian commodity prices, FAS said. For example, from February 2020 to February 2021, the average price for a 60-kilogram (kg) sack of soybeans at the Port of Paranagua rose 90% on the year, when valued in BRL, to R$166.32 per 60-kg sack, it said.

Domestic Crush

FAS forecasts 48 million mt of soybeans destined for processing in the 2021-22, an increase of just over 2% on the 2020-21 estimate of 47 million mt.

The forecast expansion is in line with the five-year average growth rate, the report said. The expansion is based on available soybean supply and rising demand for both soy oil and soymeal domestically, as well as export demand which will be supported by the continued weakness of the Brazilian real.

FAS forecasts 2021-22 soybean meal production at 36.9 million mt, up from the estimated 36.15 million mt in 2020-21.

Domestic soymeal consumption is forecast to increase around 3% year on year in the current and next seasons, the report said. The domestic meal demand will grow in line with a recent increase in beef and pork production of between 2%-3%, FAS said.

For 2021-22, FAS forecasts soy oil production at 9.5 million mt.

Domestic oil consumption is expected to increase to 9.1 million mt in 2021-22, up from 8.4 million mt in the current season, the report said.

According to the USDA, higher soy oil production and consumption in Brazil are based mostly on higher biodiesel blending mandates.

Brazil’s current rate is set at 13%, or B13, and is slated to increase to B14 in 2022.

Exports

Brazil’s soybean exports in the 2021-22 marketing year are forecast at 87 million mt, 2 million mt higher year on year, FAS said. The forecast is based on available supplies and a favorable exchange rate, it said.

FAS anticipates continued weakness of the Brazilian real to support soybean exports amid the expected sluggish domestic economy grappling with after-effects of the coronavirus pandemic.
Source: Platts