Support for rapeseed from a tight global balance sheet for soybeans: the daily cereal market

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After the USDA’s World Agricultural Supply and Demand Estimates (WASDE) released last week, the global soybean balance sheet looks very tight. This tight picture can be expected to support the broader oilseed complex, including rapeseed prices, this season.

Soy consumption ahead of production for 2021/22

In the latest WASDE, the USDA cut its Brazilian and Argentine soybean production estimates for this season (2021/22) by 5.0 Mt and 3.0 Mt respectively. These reductions were larger than average business expectations, but did not go as far as some private forecasts. The cuts follow dry weather in South America.

As a result, the forecast for total world soybean production for 2021/22 is down 9.2 Mt from the December report, at 372.6 Mt.

Global consumption was also reduced in January’s WASDE. However, that was only 2.1 Mt to 374.9 Mt. Consumption now exceeds this season’s estimated world production of 2.4 Mt.

As a result, global stocks to be used for soybeans (2021/22) fell from 27.1% in December 2021 to 25.4% this month. This presents a very tight picture for soybeans for the remainder of the season, even if production estimates do not factor in further cuts.

Figure showing tight stocks to use for world soybeans

What can further tighten this image?

With stocks this tight, the market will remain sensitive to new South American production ‘news’, whether bullish or bearish. Indeed, South American crops are expected to account for a large portion (54%) of global soybean production this season (2021/22). Further production cuts could further tighten the soybean supply situation, also supporting rapeseed prices.

Last week we saw Bolsa de Cereales reduce crop condition scores for Argentine soybeans. The proportion of soybeans rated “excellent/good” decreased by 17 percentage points (pp) from the previous week, to 31% as of January 12. Meanwhile, soybeans rated “poor/very poor” rose 16pp to 29%.

Rains arrived in Argentina over the weekend, bringing relief to late planted soybean and maize crops. The weather forecast looks mixed this week. Argentina is due rain in most parts, but the heaviest rain is expected towards the end of the week (Refinitiv).

Southern Brazil appears to remain relatively dry, but continued rains in northern and central regions are disrupting early harvests. The trade is now awaiting more news on initial yields, as 1.7% of soybean acreage is now harvested (Refinitiv).

China is also to be watched in the balance between supply and demand. Soybean imports are reported to be down year-on-year, although pork production is almost back to pre-African swine fever levels. Something to watch out for in the future.

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