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NAPERVILLE — The U.S. government’s latest projections suggest a little more comfort in global soybean stocks over the next year versus corn or wheat, but that is based on some crop assumptions that could be difficult to achieve, especially all at once.

The U.S. Department of Agriculture’s first outlooks for the upcoming 2022-23 season, published last Thursday, suggest next year’s soybean supply relative to demand will safely rise from this year but remain on the tighter side compared with other recent years.

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Several limiting factors may already exist on the production side, potentially adding pressure to a scenario without a huge safety net. Most-active Chicago soybean futures on Wednesday settled at $16.62-3/4 per bushel, record high for the date.

USDA sees 2022-23 soybean production in Brazil, the United States, Argentina and Paraguay rising more than 13% on the five-year average and more than 8% above the prior high. Those countries export 94% of the world’s soybeans.

Soybean output soared above the prior average by an even larger degree in each season from 2013-14 through 2016-17, and that was rooted in both area and yield increases. Planted area growth this year is predicted to be notable versus many past years, but the yield gains are more marginal.

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There are only four years in the last 15 where soybean yields in the big three – Argentina, Brazil and the United States – all exceeded their preceding five-year averages. Brazil and the United States, the top two exporters, achieved that feat simultaneously in seven of the last 15 years.

SOUTH AMERICA

The biggest standout lies with top exporter Brazil, which USDA expects to rebound from this year’s terrible crop with an astounding 149 million-tonne harvest in early 2023, easily beating 2020-21’s record of 139.5 million.

That forecast clashes greatly with last month’s USDA attache report pegging Brazil’s next soybean crop at 139 million tonnes, primarily on a yield 8% lower than the USDA official. The attache assumes normal weather but lower fertilizer use based on global market conditions.

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Brazil imports 85% of its fertilizer needs and Russia is a top supplier, though shipping data last month showed Russian fertilizers continuing to arrive in Brazil after Russia’s invasion of Ukraine, despite sanctions.

If fertilizer availability does not prevent expansion of soybean area and/or strong yields, high costs could be a factor. Agency IMEA in Brazil’s top soybean and corn state Mato Grosso estimates variable cost of soybean production for farmers there rising 71% on the year. Some producers may have difficulty securing credit due to tighter government resources.

But even if high costs and input availability do not limit Brazil’s soybean production, the weather might have a say in its southern areas. Forecasters are calling for a third straight year of La Nina in 2022-23, which occurs when surface waters in the equatorial Pacific Ocean are cooler than normal.

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La Nina can produce dry growing seasons in southern Brazil and especially in Argentina. Crops there can be successful during a La Nina, but all the worst harvests coincided with a La Nina, so yield losses are a reasonable bet.

That could put USDA’s 51 million-tonne soybean harvest peg for Argentina at risk. The agency puts 2022-23 plantings at a six-year high, likely associated with increasing costs and risks for competing crops.

USDA has Argentina’s soy yield rising 10% from the previous two-year average, and both of those years featured La Nina. The country harvested 42 million tonnes of the oilseed in 2021-22, the worst since 2017-18, also a La Nina year.

USA

USDA’s projections last week demonstrated that U.S. ending stocks in 2022-23 would not be overly comfortable even with a record crop. A stocks-to-use of 6.8% would be up from 5.3% in 2021-22 and 5.7% the year before that, but it is well off the previous three oversupplied years when the ratio averaged more than 15%.

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To start, U.S. farmers must plant the record 91 million acres they intended as of early March. North Dakota, slated to sow nearly 8% of the U.S. soy area this year, is planting at the slowest pace on record, just 2% complete as of Sunday.

The state’s corn and wheat planting are also incredibly slow, so whether soy acres are lost in North Dakota and how many depends on which crops producers prioritize and the next few weeks of weather. Nationally, soybean planting delays are less extreme.

USDA’s trend yield of 51.5 bushels per acre requires very good summer weather in most of the growing regions, though it is not unreasonable as a higher yield has been observed once before, in 2016. Coincidentally, that was also the last year in which North Dakota harvested bumper crops. Karen Braun is a market analyst for Reuters. Views expressed above are her own.

(Editing by Matthew Lewis)