October 17, 2014

Although soybean prices are twice what they were ten years ago, global output is flooding demand.  U.S. soybean production is forecast to climb 17% to 106.87 million tons brining global carryover inventories before next year’s harvest to 90.67 million tons according to the U.S. Department of Agriculture (USDA). The surplus will be the highest on record and will equal 31.9% of global demand – compared to a surplus of 24.5% of global demand a year earlier.  Brazilian soybean output has quadrupled over the past 20 years and global harvests have increased by 30% over the past three years as demand from China brought record prices in 2012, however global demand has increased by 10%.  Brazil’s state of Mato Grosso has doubled its area under soybean cultivation since 2002 to 9 million hectares and production from the state is forecast to be between 27.5 million and 28.3 million tons – more than China produces.  The momentum of increasing soybean production has not yet adjusted to the rate of global demand.  Soybean farmers in Mato Grosso have sold only 11% of their crop compared to 50% of their crop at this time a year ago.  The global surplus scenario has caused soybean prices to plunge over the past months and Brazil is beginning to see farm spending decrease and expects a decrease in area planted in soybeans in 2015 for the first time since 2006.

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