World Soy Production to Fall Next Season; Argentina May Be Exception

Oil World foresees global soybean production falling next season for the first time in four years, based in large part on a projected decline in production of 4 million tons year on year from the U.S, bringing the country’s output to 104 million tons. It will not be likely, however, that this decline will be able to support global prices, as world inventories are forecast by Oil World to increase 34% to 87.7 million tons this season, creating a global surplus going into the next.

For Brazil, the group expects a decline in output of 2.2 million tons to 92 million tons. However, this won’t result in a decline in South American output, as Brazil’s drop in output will be more than offset by increases in production in Argentina and Paraguay. Oil World expects soybean plantings in Brazil is to remain constant. However, falling prices, lack of credit, high interest rates and a depreciation of the Brazilian real causing inputs costs to rise, is causing the U.S. Department of Agriculture staff to warn of a drop in planted area.

If weather conditions remain fair, Argentina is forecast to see soybean production reach a new record of 57 million tons in early 2016, but uncertainties exist surrounding elections later this year that could result in a reduction on export taxes in soybeans, but could also cause volatility in the country’s currency.

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