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| USA soybean farmers should keep an eye on the developments in Brazil; this will provide crucial insights into whether the USDA may start to show slower growth in Brazil for this past year and years to come.
A Must Read FAS July 1 Brazil Soybean Update (AiQ Insight).
The USDA Foreign Agricultural Service (FAS), commonly called Post, released a detailed update on the soybean situation in Brazil. Post provides the latest on flooding in the south, lower yields by state, and an early look at the 2024/25 campaign.
Most analysts will focus on the cut to 150 million tonnes as validating their guesses or better processing demand as confirming their price outlook. This is missing two critical points.
1 Post revised up this year's acreage by 600K ha to 45.8, which remains 1 million below the USDA for next year at 46.3. This 45.8 current year is still below CONAB (46) and Agroconsult (46.4).
2 Next year’s yields were lowered to 3.456, 3.5% below the USDA current forecast. While this may not sound like a lot, it is more than 5 million tonnes of production potential.
A major challenge for private forecasters was their “anchoring.” AgResource and Cordonnier were cutting yields as early as November, already below 160 million tonnes. This is just too early to imply a 5-6% production potential loss.
Brazil's weather improved in late December, and many of these groups were 10 million tonnes too low. Many kept cutting. The errors compounded, and farmers were left long and exposed due to poor recommendations. Brazil had an anchoring problem early on and a data problem later. Post confirms AiQ’s weather timeline in this report.
These changes have much bigger implications for yield and production potential. Further, how the USDA chooses to adopt or not adopt these figures in the month ahead will be telling for its methodology going forward.
Mato Grosso
Today, CONAB is the highest of the three local yield-reporting institutions. CONAB uses larger acreage and smaller production (for both years), which implies that USDA’s yields could be overstated significantly.
Experts take CONAB’s forecasts with a grain of salt. Just ask the sugar traders. Therefore, something has to give.
The big question over the next 90 days
Will the USDA follow Posts cuts? Will it adjust its 2024/25 outlook? AiQ is already very concerned with the current weather trends in Brazil. Precipitation is trending lower in the key producing areas. Shifting the trend yields lower would adjust total soybean production by 15 million tonnes or more for 2024/25 balance sheets.
The USDA has shown a willingness to stand independently, ignoring the anecdotal information from other reporting agencies and even its own FAS in the last few years.
Most experts are still guessing at production figures while we are building robust models to reflect the complexity of weather data and methodologies that lead to consistent predictions.
This is a key signpost most will ignore. Get the full FAS update at the link below. The lastest updates are always free on the app. No Ads, no personal info.
https://apps.fas.usda.gov/newgainapi/api/Report/DownloadReportByFile... and Products Update_Brasilia_Brazil_BR2024-0016
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USDA FAS cuts Brazil Soybean #s. Will the USDA start to show a tighter global situation?
