Flooding Spurs Speculative Spike

Heavy floods in southern Brazil have triggered a significant speculative surge in soybean prices. Despite potential losses of 1-2 million tons due to the flooding, the overall national harvest is expected to decrease by at most 1%.

Impact of Rio Grande do Sul Rains

Prolonged rains in Rio Grande do Sul have disrupted harvesting schedules and caused widespread flooding, potentially reducing soybean harvest by 1-2 million tons to 19-20 million tons. Despite this setback, approximately 95% of soybean crops have been harvested across the country.

Forecasts and Market Response

StoneX has maintained its forecast for Brazil's 2023/24 soybean crop at 150.8 million tonnes. However, the forecast for corn production has been increased by 1.4 million tonnes to 125.55 million tonnes due to expanded plantings.

On the Chicago exchange, July soybean futures surged by 2.8% to $458.8/t, driven by favorable weather conditions and robust sowing rates in the USA. Meanwhile, November futures rose by 1.6% to $448.2/t, supported by rising soybean meal prices due to delayed deliveries from Argentina.

US Planting Progress

According to the USDA's NASS, as of May 5, only 25% of planned soybean acreage was planted in the US, falling short of market expectations of 29%. This is lower compared to last year's 30% and the five-year average of 21%.

Argentina's Production Outlook

FAS USDA experts anticipate Argentina's soybean harvest to reach 49.5 million tons in 2023/24 FY, with a further increase to 51 million tons in 2024/25 FY due to expanded sowing areas. This uptrend is expected to drive soybean meal exports to 27 million tons, as soybean processing reaches 40 million tons, significantly boosting soybean meal supply.

Argentina's Role in the Global Market

Argentina, being the world's largest exporter of soybean meal and oil, possesses substantial processing capacity and a well-established industrial and export infrastructure, particularly along the Parana River.