Sometimes it pays to ask. For months, I have been scratching my head, noticing that USDA's ending soybeans stocks estimates for Brazil were uncommonly low while Brazil's soybean prices stayed relatively cheap, trading lately at roughly $9 U.S. per bushel in Paranagua.
Then Tuesday's report from USDA lowered the estimate of Brazil's ending stocks from 36 million bushels to an unbelievably low 17 mb for the current marketing year, which ends in two weeks. So I asked USDA for help in understanding how supplies could be so low while prices seem unfazed.
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USDA's economist was extremely helpful. Although the agency did not wish to have his remarks published verbatim, the insights offered shed much light on Brazil's soybean situation. Suffice it to say that I am not the only one puzzled by how unreasonable an ending stocks estimate of 17 million bushels seems, especially as export activity remains active and prices are not reflecting a lack of supplies.
The conversation offered two logical possibilities -- unreported production and/or unreported imports. While neither of us could say for sure where the extra soybeans are coming from, it did not escape our notice that Argentina is just across the border.
With those insights in hand, Markets Editor Katie Micik asked DTN's South America Correspondent, Alastair Stewart to weigh in. He pointed out that Brazil's soy industry, ABIOVE, is estimating the current year's ending soybeans stocks at 1.59 million metric tons, or 58 million bushels. This offers a little more breathing room than USDA's estimate, but reinforces the notion that soybean supplies in Brazil remain uncommonly tight -- even if actual levels are above USDA's official 17 million bushel estimate.
So far in the new-crop season, parts of Mato Grosso have suffered from dry weather, but the overall outlook for row crops in Brazil and Argentina remains generally favorable. With big harvests expected this spring, it has been curious that March soybeans have not traded lower. DTN Senior Analyst Darin Newsom also notes that the March/May soybean futures spread is nearly inverse, uncommonly bullish commercial behavior for a market that is supposed to be so well supplied.
Thursday's response from USDA suggests that Brazil has found ways to secure more soybeans than can officially be accounted for. Yet the point remains that they will not have a big surplus heading into the new season that starts in February. Should a weather problem develop, U.S. soybean exporters may become a lot busier in 2016 than most currently expect.
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