It wasn’t that long ago that U.S. soybean futures were trading at $15 to $16 a bushel, driven up by drought conditions in the growing areas of the U.S. and South America and concerns about shipments of soybeans, other oilseeds and grains from Ukraine.

Those prices may be only a fond memory in the coming months, given the improved outlook for soybean production not only in the U.S., but also in Brazil and Argentina, and the prospects for continued oilseed shipments under the Black Sea Grain Initiative.

“I think the overall message is we have moved from a situation where we had weather-related shocks in Argentina and Brazil and in North America whether it was for wheat, corn or soybeans,” said Dr. Jason Grant, W.G. Wysor professor of agriculture and director of the Center for Agricultural Trade at Virginia Tech.

“Now we are back to having ample supplies and potentially even larger carryout stocks for soybeans, corn and wheat,” he said, referring to numbers from USDA’s World Agricultural Supply and Demand Estimates or WASDE reported on May 12.

Speaking during a U.S. Soybean Export Council Webinar following the report’s release, Grant noted the WASDE Board raised its estimates of the 2023-24 U.S. soybean crop from April’s 2022/23 estimate of 4.276 billion bushels to 4.510 billion bushels although the acreage projection was decreased from May 2022’s 91 million acres to 87.5 million.

Corn production

USDA also increased its estimate of U.S. corn production to 15.265 billion bushels from April’s 2022-23 estimate of 13.730 billion bushels due, in part, to anticipated improved weather conditions in the U.S. this spring and summer.

“What happens in the U.S. is one part of the equation, and an increasingly important part is what happens in South America,” Grant said. “We see 163 million metric tons out of Brazil and a rebound in Argentina following a couple of years of drought up to 48 million metric tons,” the highest production in the region in three years.

As he began his presentation, Grant noted that November new crop soybean futures contracts were down about 12% since reaching a high of $14.20 a bushel in January of this year.

“If you look back over the last two decades, historically, the new crop highs are typically traded in June and November,” he said. “So we still have a bit to go out to June and certainly out to November, and Mother Nature can play a role in that.

“There was rebuilding of supplies and questions around the strength of Chinese demand as well as oilseeds, vegetable oil and meal flowing out of the Black Sea that was restarted through the Black Sea Grain Initiative. We had those highs made early in January, and, before the report was released, we were trading around $12.48 per bushel. Corn was down 15% from January.”

Large Brazilian crop

One factor in the selloff was a projection for the harvesting of one of the largest Brazilian corn crops on record in June and July. The market was also hit with Chinese cancellations of U.S. corn exports “in favor of scooping up more Brazilian corn,” said Grant. “Ukraine’s corn exports also seem to be flowing. There are still questions on the 2023-24 harvest with the conflict still ongoing.”

Larger U.S., Brazilian and Argentine crops also could offset any declines out of Ukraine for corn, all of which has led to corn falling from its highs slightly below $6.20 a bushel at the beginning of this year to $5.98 near the end of May.

Because of those declining prices or expected increased supplies, soybean sales and shipments have been “outstanding this year,” according to Grant. “It’s certainly not a record year, but it is compared to previous marketing years running reasonably on trend in the first 37 or so weeks through April 27.”

China’s reporting of soybean imports also bears that out with 2022-23 U.S. exports on trend compared to previous years. Chinese imports of Brazilian soybeans, while not as strong as they were in 2018 and 2019 when the U.S. was involved in trade and tariff disputes with China, are also on trend, Grant noted.

Market volatility

The conflict in Ukraine has added to the volatility brought on by supply chain and weather issues in recent months and will continue to do so in the markets for wheat, corn and oilseeds.

Grant displayed a chart showing Ukraine’s exports for the calendar years beginning in 2019 when few analysts dreamed that Russia would attempt to reclaim Ukraine as part of the old Soviet Union.

“The red line shows what happened in March of 2022 when the invasion occurred, and you can see a drop off in their exports,” he said. “But the soybeans recovered, as was the case with their rapeseed. A lot of that went through alternative routes to Europe.”

The Black Sea Grain Initiative, an agreement signed in August of last year, also allowed Ukraine’s exports to return to more levels with shipments permitted through the Black Sea ports to its traditional markets in the Middle East and Mediterranean countries.

“This heavier red line traces Ukraine’s exports in 2022, and you saw a big dip in the conflict area and then it recovered,” Grant noted. “Now, we didn’t recover to its normal sort of in-season production, although Ukraine has exported a lot more corn through the Black Sea Initiative. These different factors have caused a lot of market volatility.

“The Black Sea Region is a major bread basket for parts of the world, and I think it is becoming less important as Ukraine is managing to find, despite all the turmoil there, routes through the BSGI or solidarity lanes in Europe.”

Click this link to view Grant’s presentation.