Source: USDA
High prices boost soybean acreage
Soybean acreage is now ready for the substantial expansion due to the rise in soybean prices as a result of increased demand from China. According to USDA estimates, the average farm price has seen a rise from USD1.60 per bushel to USD9.80 per bushel, during the 2020/21 season. China is the leading importer, purchasing an estimated volume of 100 million metric tons during the 2020/21 marketing year, and the unprecedented soybean demand from the country has contributed to the rise in soybean prices.
According to the US agriculture department’s World Agricultural Supply and Demand Estimates (WASDE), harvest shortfalls caused by unfavorable weather in key US production states have led to low supplies for 2020/21. Projections are estimated at 116.2 million tons, a reduction of 1.2 million tons from the previous season, due to lower harvested areas in Kansas and North/South Dakota. Since the United States is the largest producer of soybeans globally, this shortfall is expected to lead to a decrease in global soybean production projections for the 2020/21 harvest season, estimated at 368.5 million tons.
Chinese demand expected to continue
Improved soybean acreage is expected to boost production for the 2021/22 season to 4,465 million bushels, a 5% increase from the previous year. According to the General Administration of Customs China, Chinese soybean demand is expected to remain high in 2021 and projected to set a new record, following the 100.33 million tonnes of soybeans that were purchased in 2020. China’s demand for soybean and other grains is expected to remain high for the next 3 to 5 years as the country continues to rebuild its hog herd, following an outbreak of African Swine Fever that decimated its pig herd in 2020. As a result, the total acreage of soybeans is expected to increase yearly to meet the growing demand.
Battle for acres expected between corn and soybean
In the US, corn and soybean have a similar planting period. Corn planting begins in April-May, and for soybean the planting starts in May-June. Farmers expect that there will be a battle for acres between corn and soybean in 2021. Concerns of reduction in corn output from major corn-producing countries such as Argentina, Brazil, and Ukraine, due to unfavorable weather, are expected to incentivize farmers to plant corn over soybeans in the US. However, as corn prices are currently low, it is hard to motivate the farmers to plant more corn. According to the Chicago Board of Trade, the most active corn contract has risen nearly 80 cents over the past three months, compared to the front-month soybean contract which witnessed a gain of around $2/bushel. Therefore, at current prices, the prices favor soybean growers. Analysts at S&P Global Analytics, Rabo Agrifinance, Futures International and StoneX Group anticipate that soybean will likely be the 'acreage winner' as corn prices and fundamentals were less appealing than those for soybeans.
Source:
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