Brazil’s soybean harvest may set a record by less of a margin than some investors expect – a factor which, combined with buoyant domestic consumption, will diminish stocks to a 22-year low, US officials said.

Brazil will produce 148.5m tonnes of soybeans for the 2022-23 harvest, as currently being seeded, the US Department of Agriculture’s Brasilia bureau said.

While still representing a record high, a harvest at that level would be below the 152m-tonne levels expected by the USDA itself and by Conab, Brazil’s official ag agency.

The finding is in line with analysis by GrainPriceNews, which has also taken a less upbeat view over prospects.

Yield penalty

The USDA bureau’s forecast factored in a slightly lower area figure of 42.8m hectares, which still represents a 4.6% increase year on year, above the “historical trend” of 3.5% annual growth.

The bureau was also more downbeat on yield, pegging it at just under 3.5 tonnes per hectare and short of a record high.

While noting farmers’ increasing adoption of genetically modified seed and of” cutting-edge chemicals and fertilizers”, it highlighted farmers’ reliance for area expansion on lower-quality land.

The bureau said that its “forecast accounts for lower yields on land that will be converted into production, such as degraded pasture, which typically takes several years to reach optimal productivity”.

Dwindling stocks

Nonetheless, the bureau remained relatively upbeat on prospects for Brazil’s soybean exports and crush in 2022-23, as starts next February, seeing them exceed even the record harvest to prompt a drawdown in inventories.

Indeed, it forecast Brazil’s soybean stocks at the close of 2022-23 dwindling to 1.90m tonnes – half the level that the USDA expects, and the weakest carryout inventory figure since 2000-01.

On a stocks-to-use basis, that would represent just 1.3%, the lowest on data going back nearly 60 years.

Fuel needs

Prospects for Brazil’s crush had been buoyed by expectations for growing domestic demand of soymeal, thanks to expanding livestock operations, and for soyoil, “driven by industrial consumption” as the country attempts to boost its biodiesel output in the face of elevated fuel costs.

Brazil’s biodiesel producers, who use soyoil as their main feedstock, “hope to increase output in the face of a potential diesel supply shortage”, the bureau said, noting that the country imports about 30% of its diesel needs.

“There are now reports that Brazil is looking to boost blending again to offset high fossil fuel prices,” after a year ago reducing the rate to 10%, in terms of the proportion of biodiesel which must be mixed into transport diesel.

“Blending in Brazil… could go to 15%.”

‘US eliminated as soyoil supplier’

Importers will also compete strongly for Brazil’s soyoil supplies, the bureau said, upgrading its forecast for shipments to 2.05m tonnes, after noting a 63% surge to 1.71m tonnes in shipments in the January-to-August period.

Trade has been boosted by factors including the Ukraine war, “which has dramatically reduced the availability” of rival sunflower oil on international markets, and Indonesia’s ban on palm oil shipments earlier this year.

Furthermore, the “expansion of US biodiesel increasing premiums for US soyoil has effectively eliminated the US as an oil supplier for the world”.