Brazil’s Soybean Harvest Advancing at a Record Pace but Uncertainty Remains in the Soy Market

The 2023 Brazilian soybean harvest is on course to be completed within the schedule, with crops from the harvest expected in the market in the next few weeks. The 2022-23 soybean crop has already been forecasted to be a record crop at 154 million mt, 18% higher than the crop output last marketing year and 20% higher than the 5-year average.

The smooth harvest progress is welcome news, giving some signals closer to the 2022-23 estimate. As of the end of April, harvest was in its final stages, with 95% of the 43.7 million hectares reported to have been harvested across Brazil. Only Rio Grande do Sul, the southernmost state, has more remaining acreage, about 35% left, which should be completed in a fortnight.

In March, farmers reported a lack of dry weather amid settled showers which created wet-like conditions and concerns of low yields, but dry locations and pockets of dry weather in other areas in the preceding weeks also enabled rapid harvesting of the crop.

The Brazilian soybean crop is expected in the market in the coming days, and so far, farmers are ramping up the speed of their soybean sales, albeit prices are low at present. The strength of the US dollar against the Brazilian Real is making it cheaper for buyers who are dollar holders. Farmers needing to make space in their silos for the harvested crop could also explain the pick-up in sales activity. That said, Brazilian ports are also currently operating at full capacity, one of those drivers that may be pushing sales.

With lots of soybeans on hand with Brazilian farmers now, it's not a good idea to reserve selling, although prices aren’t at the highest. Farmers and producers thinking about price risk would have a difficult decision to make, as the Brazilian crop coming in does, to a certain extent, replenish historically low global soybean inventories.

China, the biggest buyer of Brazilian soybeans over the last few weeks, has seen its soybean CFR basis trending lower amid its high stocks and shipments coming from Brazil. The big question is how much will China demand from Brazil going forward?

Adding to the pressure is consumption in the Chinese domestic hog industry: so far, demand from that side hasn’t recovered since falling earlier in the year. The Chinese market has seen lower commitments so far, which suggests demand from China may be lackadaisical rather than robust, helping to keep the market in an uncertain territory.