Fundamentally Speaking

As expected, USDA pared South American soybean production in the February WASDE report as the La Nina weather phenomenon has disrupted the normal pattern of rainfall over the past few weeks in that continent.

Production in Argentina was lowered 1.5 million metric tons (mmt) to 45.0 mmt, in Brazil output was lowered 5.0 mmt to 134.0 mmt and in Paraguay production was pared by 2.2 mmt to 6.3 mmt.

These days a lot of people don't believe the information put out by various Federal agencies and I guess this applies to the USDA as trade paid little heed to the WASDE report figures, as with the exception of global wheat stocks, the numbers were higher in almost every other category than seen for the average trade estimates.

Justification for the trade's indifference or outright rejection of the USDA numbers also came this week in the form of a shockingly low soybean production estimate by Conab, the official Brazilian crop agency.

This is no ambulance chasing here as Conab has reputation for being as conservative as the USDA in adjusted Brazilian crop sizes up or down so what they are saying is the Brazilian soybean crop right now just a complete disaster, no two ways about it.

Conab is forecasting Brazilian farmers will produce 125.5 mmt of soybeans this season vs. their January forecast of 140.5 mmt.

This chart shows the harvested acreage in 1000 hectares on the right-hand axis and the percent deviation from 20-year trend for soybean yields on the left-hand axis for Argentina, Brazil, and Paraguay.

The graphic does show that planted area of soybeans has risen over the past two decades in Argentina and Paraguay but not to the extent seen in Brazil where it has more than doubled over the past 20 seasons.

That however cannot make up for an abysmal yield for in a year when we needed blockbuster South American soybean yields, Mother Nature again has reared her ugly head.

The USDA soybean yield for Brazil this year was put at 3.32 metric tons per hectare (mt/ha) which would be lowest since 2.87 mt/ha seen in the 2015/16 season and 4.5% below the 20-year trend, also the largest negative deviation from trend since that 2015/16 season when it was 9.2% below trend.

Taking the Conab number however results in a yield of 3.09 mt/ha which is 11% below trend and this is by far the lowest negative yield deviation at least over the past 20 years.

In Argentina, the forecasted yield of 2.78 mt/ha is 4.8% below trend, both the lowest since the 2017/18 marketing year while the worst of the batch at least according to the USDA is Paraguay where the forecasted yield of 2.25 mt/ha is the lowest since the 2011/12 season and that is off a huge 19.4% from trend, also the largest since the 2011/12 season.

Expect to see even lower estimates for Argentine and Paraguayan soybean production and yield estimates when their crop forecasting agencies update their figures.

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