Lower inventories may underpin quotes in 2021

Cepea, January 15, 2021 – Despite the low rainfall at beginning of soybean sowing (2020/21 crop), higher precipitation since late October 2020 raised expectations about a record production in Brazil, estimated by Conab (Brazil’s National Company for Food Supply) at 134.5 million tons, and by the USDA, at 133 million tons, 7.7% and 5.6% up, respectively. Still, the inventory/consumption ratio may be the lowest in the last nine seasons, which may underpin prices for soybean and tis by-products in 2021. It is worth to mention that higher production costs, majorly for fertilizers, may limit farmers’ profit margins in 2021.

 

Brazilian soybean farmers took advantage of the high price levels in 2020 and sold more than 50% of the 2020/21 crop, according to Cepea surveys. Most of the volume traded should be exported. Demand is expected to increase in the Brazilian market too, primarily from the livestock sector (considering soybean meal). Besides, the demand for soy oil for the production of biodiesel should continue high, challenging the food sector in terms of oil supply.

 

Domestic soybean consumption in the 2020/21 season is estimated by the USDA at 48.1 million tons, 3.46% up from that in the previous season and a record. This scenario is linked to expectations for higher demand for soybean meal in Brazil, which is forecast at 18.5 million tons, 2.8% up from that in the previous season and also a record. Soy oil consumption is also forecast to set a record in Brazil, at 7.7 million tons, 4.19% higher than that in the 2019/20 season. It is worth to mention that, for the first time, the industrial consumption of soy oil in Brazil (3.9 million tons) should surpass that oil consumption as food (3.8 million tons).

 

On the other hand, exports should decrease in 2021. China should purchase more soybean from the United State, encouraged by the commercial agreement between these countries. Thus, Brazilian soybean exports are estimated at 85 million tons, 7.7% down from that in the 2019/20 season. As regards soybean meal and soy oil, shipments are forecast to be 4% and 0.52% lower, respectively, at 16.8 million tons and at 1.15 million tons.

 

(Cepea-Brazil)

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