Global soybean supply set to remain tight

Image: UFOP

The USDA holds on to its high estimate for Brazilian soybean production in 2020-’21. The agency also continues to expect a global record. Nevertheless, these volumes would not cover world consumption. The reason for the decline in stocks is the steady growth in China’s import demand for soy.

In the oilseed market, attention is entirely focused on the upcoming soybean harvest in South America, especially Brazil. Over the past several months, the La Niña weather phenomenon led to drought and delays in plantings. Although rainfall eased the situation, market participants recently remained skeptical about crop expectations. However, in its most recent estimate, the USDA continued to expect a bumper crop of 133 million metric tons in Brazil. According to Agrarmarkt Informations-Gesellschaft (mbH), the USDA attributes this record to the recent rains and forecasts of more rain to come in the weeks ahead.

Whereas the outlook for the Brazilian harvest remained unchanged at a high level, expectations for Argentina were lowered and those for Canada raised. The global soybean crop was again seen at a new record high of 362 million tons. Expectations for world trade were barely adjusted. The only important thing to note is that Canadian exports were raised from 3.85 million tons the previous month to 4.2 million tons, based on the raised crop forecast. World ending stocks 2020-’21 are expected at 86.6 million tons. This translates to a decline of 9.2 million tons year on year and would be the lowest level in five years.

The Union zur Förderung von Oel- und Proteinpflanzen (UFOP) has pointed out that this increase in soybean production is not just due to increases in yield, but also to expansions in area. According to information from the German Ministry of Agriculture (BMEL), the area planted with soybeans in the 2020-‘21 crop year is estimated at 38.3 million hectares for Brazil, 33.6 million hectares for the U.S. and 17.3 million hectares for Argentina. These production regions determine global supply, which has immediate implications for the incomes of European producers. The UFOP has said that it has repeatedly underlined that German, and European, rapeseed is by far the most important domestic and, at the same time, GM-free source of protein. It not only helps to reduce soy imports. What’s more, it is grown in crop rotation systems that, in the wake of the reform of the EU’s Common Agricultural Policy, meet stricter environmental standards than production systems in the soybean-exporting countries. UFOP has complained that this ecological “value” is not remunerated. The added value and price for rapeseed are based on market conditions, more specifically prices for soybean meal and, above all, rapeseed oil. The price for rapeseed oil, in turn, is closely linked to the development in sales in the biofuels sector.

UFOP has urged that politicians must finally acknowledge that these interrelations exist in a supply chain that is certified as sustainable. “Farm to Fork” strategies relating to the promotion of national and European legume production will also come to nothing if the above-described interrelations are ignored. Therefore, UFOP has called upon the German government and parliaments to think holistically and gear the biofuels policy to domestic protein crops. The association has urged that the protein generated when processing rapeseed to produce biodiesel should be taken into account in greenhouse gas assessments. This step would go a long way towards developing an adequate and environmentally balanced “cultivated biomass policy.”