BRAZIL- Domestic demand for soy oil drove the Brazillian soybean crush forecast to 51.5 million metric tons (MMT) for 2022/23, according to the United States Department of Agriculture (USDA).
The USDA raised its projection for Brazil’s domestic soybean oil consumption to 7.83 MMT in MY 2022-23, from 7.5 million in the previous year.
From the projected soybean crush, the forecast for meal production is at 40 MMT, and oil output could reach 10.5 MMT.
Soybean oil is increasingly utilized as a biofuel, with global demand for its use in biodiesel production increasing year on year.
“There’s a lot of interest in soybean oil globally given the vegetable oil shortage, so I would think that any increases in the [biodiesel] mandate can be considered supportive locally,” S&P Global Commodity Insights Head of Grains and Oilseeds Analytics Peter Meyer said.
The USDA report also predicts that the country will reap a record soybean crop of 153 million metric tons (MMT) from a planted area of 43.3 million hectares (ha) for 2022/23 up from 40.9 million ha during the 2021/22 marketing year (MY).
The increase from the previous season comes from marginal gains across several states, with the largest expansion in Mato Grosso from converted pastureland.
Producers throughout the state of Mato Grosso, soy growers noted that they are seeing better-than-expected yields for early harvested fields.
However, despite the positive forecast in production, producers reported facing a lack of sunshine in-between rain periods, creating a “winter-like” weather pattern.
If the pattern continues, soybean yields could reduce significantly, because of quality losses associated with mold.
This pattern could compromise the crop’s export when the high moisture content exceeds the maximum 14 percent moisture needed for export.
Brazil accounts for more than 50% of the global soybean exports, and according to USDA, the forecast for soybean exports this marketing year (MY) 2022/23 (February 2023 to January 2024) could reach 97 MMT.
This projection is based on favorable production expected in the main regions that produce soybean in Brazil, especially in Mato Grosso, and southern brazil.
Additionally, there is an anticipated decrease in production in the international market, especially from Argentina, which has had prolonged seasons of drought.
China’s demand for soybean returns
Moreover, there is a returning demand for the crop from the Chinese as well as demand from emerging markets as more people lean towards soy as a meat alternative.
Owing to the voracious appetite for Brazilian soybeans out of China, Brazilian stocks will remain lower than 0.5 percent of domestic supply in 2022/23, historically the lowest level in Brazil.
While the government is concerned with the scarcity of beans on the domestic market and possible inflation, the USDA does not anticipate any export restrictions.
Instead, traders and producers alike are focused on sales to take advantage of the upside in prices resulting from international demand and local scarcity.