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May 11, 2017

WASDE Indicates Lower S. American Soy Production in 2017/18

In their May report, WASDE released their first estimate of the 2017/18 soybean and corn estimates for South America. For soybeans, they agree with recent commentary that while the acreage may be basically unchanged next year, the projected yields will be lower than the crop that was just harvested. As a result, they are projection lower soybean production in 2017/18 in Brazil and Paraguay and unchanged in Argentina.

Their current estimate for the 2016/17 Brazilian soybean crop is 111.6 million tons, but for the 2017/18 crop, it declined to 107.0 million tons. For the Argentine soybean crop, they are estimating the 2016/17 crop at 57.0 million tons and same for the 2017/18 crop. For Paraguay, they are estimating the 2016/17 crop at 10.3 million with a decline to 9.4 million tons in 2017/18. Combining all three countries, the 2017/18 soybean crop is expected to be 5.5 million tons less than the 2016/17 crop (178.9 million tons in 2016/17 vs. 173.4 million tons in 2017/18).

For the 2017/18 corn crop in Brazil and Argentina, they are projecting only a small decrease of 1.0 million tons. The 2016/17 Brazilian corn crop is currently estimated at 96.0 million tons and the 2017/18 corn crop is estimated at 95.0 million tons. The 2016/17 Argentina corn crop is currently estimated at 40.0 million tons and the 2017/18 corn crop is also estimated at 40.0 million tons.

Brazilian farmers should already be actively purchasing their inputs for the 2017/18 soybean crop, but that has not been the case. Their lack of enthusiasm to clear more land or to convert additional pastures to more soybean production is the result of very low soybean prices. Therefore, I anticipate that the 2017/18 Brazilian soybean acreage will be unchanged to maybe up 1-2%.

Brazilian farmers have only sold approximately 50% of their recently harvested soybean crop due to low prices. Barring an increase in soybean prices due to a significant weather problem in the U.S., Brazilian farmers could still be holding significant quantities of their 2016/17 soybean production when they go to the fields to plant their 2017/18 crop.

Additionally, I think the 2017/18 Brazilian soybean yields will probably be lower than the sky-high yields recorded this past growing season. Brazilian soybean yields set all-time records this past growing season beating the old records by 15-20% in some locations. It is hard to imagine that Brazilian soybean yields will be higher in 2017/18 especially given the fact that farmers may try to economize on inputs given a bleak price outlook.

I am currently estimating the 2017/18 Brazilian soybean crop at 105 to 110 million tons. Conab will issue their first estimate of the 2017/18 soybean acreage in their October report.