Reports of severe rain and flooding in Brazil may have destroyed some unharvested soybeans, but the impact on global soybean prices remains negligible, according to the U.S. Department of Agriculture (USDA).
The USDA cut 1 million bushels of soybeans from the estimated size of the Brazilian soybean crop in response to the flooding in Rio Grande do Sul, according to the agency's May World Agriculture Supply and Demand Estimates. But global soybean production is expected to grow by 28.9 million metric tons with the coming harvest — easily replacing the soybeans lost in the flood, according to USDA.
As a result, soybean prices should stay within a range of US$11.50 to US$12.60 per bushel for much of the summer, before potentially falling at the end of the season, Jason Grant, director of the Center for Agricultural Trade at Virginia Tech, told members of the U.S. Soybean Export Council in a May 10 webinar.
Much of the increased production is tied to rising demand for soybeans to be made into biofuels, according to the USDA. The agency projects that biofuel production could expand some 1 billion pounds this year, leading to an increased soybean crush of 2.43 billion bushels. But that also means soybean meal is increasingly available — and very competitively priced, Grant said.
“We are crushing a lot,” he said, so soybean meal from the U.S. is selling at internationally competitive prices. Meal exports, he noted, are running significantly ahead of their 5-year average pace.
But there remains some uncertainty in the markets, Grant said. It's not yet known exactly how many soybeans were lost in Southern Brazil, although the number is likely not large, he said, because most of the soybeans in the affected area were harvested before the flooding began.
There's also the question of what happens with inflation and interest rates in the coming months. Inflation, Grant said, will dictate the strength of export markets this year.
“Yes, crush is key, and there are lots of bioenergy products and potential demand that has the potential to explode in the next 5 to 10 years,” he said, “but that's what I am keeping an eye on — macro fundamentals.”
