The February USDA World Agricultural Supply and Demand Estimates (WASDE) report was short on surprises, but still delivered major news for U.S. soybean growers.
“The February report is usually pretty tame with only small changes and this month followed that same pattern,” says Joe Lardy, market intelligence and insights analyst with CHS Global Research. The February 2022 report focused on South American soybean markets, which had very large cuts to production again.
“Brazil soybeans were at 144 million metric tons in December,” Lardy continues. “In the February WASDE report, Brazil soybeans were cut by 5 million metric tons. This follows the January report that also indicated a 5 million metric ton cut.” Brazil soybean production is now down to 134 million metric tons and Lardy expects another big cut when the March report is released.
Argentina soybean harvest and Paraguay soybean harvest production numbers also dropped. “Many times, we get very focused on just Brazil and Argentina soybeans,” Lardy notes. “But Paraguay is a decent-sized soybean producer. Two months ago, its production was at 10 million metric tons. In the February WASDE report, Paraguay production is down to just over 6 million metric tons. We’ve seen a 40% production cut in Paraguay in just two months.”
Weather is the culprit
Poor weather is largely to blame for this production drop, says Lardy. “What we’re seeing is a typical La Nina pattern, which particularly affects the southern areas of Brazil, Argentina and Paraguay.”
Dry conditions have also impacted river levels. “The Parana River is the main artery for exports to leave the inland of Argentina and make it out to the ports,” Lardy says. “We’re at historic lows there. They can’t load as much on barges to get soybeans and soybean meal to the port. That’s going to have a significant impact on Argentina soybean exports, which will support the soybean meal market here as well.”
What does this mean for U.S. farmers?
USDA increased the U.S. soybean crush rate, says Lardy, which indicates a strong pace for soybean markets in the U.S. With new biodiesel facility activity, Lardy believes this pattern will continue.
“USDA analysts didn’t touch export numbers in this WASDE report. I think they’re waiting to see how these big production cuts in South America translate to more business in the U.S.,” says Lardy. “Big production cuts to South America have raised the price floor for soybeans, so U.S. farmers can have more confidence that trading ranges are moving higher. This soybean market should give farmers a good opportunity to market soybeans at strong levels and farmers should take advantage of these good levels.”
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