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July 13, 2017

2017/18 Soybean Production in South America could decline 9 mt

In their latest monthly report, the World Agricultural Supply and Demand Estimate (WASDE) forecasted that the 2017/18 soybean production in South America could decline by as much as 9.0 million tons compared to the 2016/17 soybean crop that was just harvested. If the decline is accurate, it would be important to the world soybean market because South America is by far the largest soybean producing region in the world.

The biggest decline in soybean production is forecasted for Brazil. WASDE is estimating that Brazilian farmers will produce 107.0 million tons of soybeans in 2017/18 compared to the 114.0 million tons produced in 2016/17. The rational for the lower production is a return to more trend line type yields after record breaking yields recorded in 2016/17. In many areas of Brazil, the soybean yields in 2016/17 broke the old yield records by 15-20%! Such high yields are not expected to be repeated in the 2017/18 growing season that will be planted in September, October, and November. The 2017/18 soybean acreage in Brazil is expected to increase maybe 1-2% compared to 2016/17.

The 2017/18 soybean production in Argentina is expected to decline slightly compared to what was produced this past growing season. In 2016/17, farmers in Argentina produced 57.8 million tons and in 2017/18 they are expected to produce 57.0 million tons. Farmers in Argentina are more interested in increasing their corn acreage in 2017/18 than their soybean acreage. The corn export tax has been completely eliminated while the soybean export tax is still 30%. The soybean export tax will start to decline 0.5% per month starting in January of 2018, but it will still leave soybeans at a disadvantage compared to corn.

The third largest producer in South America is Paraguay and the 2017/18 production in Paraguay is forecasted to be 9.4 million tons compared to 10.6 million tons that was produced in 2016/17. The reason for the lower forecast for Paraguay is twofold. First, the soybean yields in 2017/18 are also expected to be lower than the record breaking yields recorded in 2016/17. Secondly, the Paraguayan government may impose an export tax on soybeans over the strenuous objections of soybean producers. It is still not certain if the tax will be imposed, and if it is, the amount of the tax is also uncertain. But just the threat of a tax may be enough to discourage soybean producers.

If you combine all three countries, the total soybean production in 2017/18 is estimated at 173.4 million tons or 9.0 million tons less than the 182.4 million tons produced in 2016/17. Even that level of production is not guaranteed because adverse weather could result in an even greater reduction.