The supply-demand balance sheet for soybeans was very tight in 2020, Bunge CEO Gregory Heckman said. This trend is expected to continue in 2021, boosting the margins, he added.
Bunge projected the soy supply situation to be tight due to drought-led delayed planting in South America in the last quarter of 2020.
Oilseed planting in both Brazil and Argentina, two of the world’s top suppliers, was delayed by a month due to dry conditions. As a result, soybean harvesting in Brazil has been progressing at the slowest pace in 10 years amid slow crop maturation and incessant rain.
Soybean farmers in the South American nation had been able to harvest only 4% of the projected acreage as of Feb. 4, compared with 16% last year, agricultural consultancy AgRural said Feb. 8.
“We’ve got to get the crop [soybeans] harvested in Brazil, get the Safrinha [corn] planted [without further delay],” Heckman said. “We need Argentina to finish out strongly [despite delayed planting],” he said.
According to the average of analysts’ estimates, Brazilian soybean output for the 2020-21 marketing year (February 2021–January 2022) is forecast at an all-time high, in the range of 133 million mt. For Argentina, the average output projections for 2020-21 marketing year (March 2021–February 2022) are in the range of 47 million mt, down 2 million mt year on year, due to a prolonged drought during the planting phase.
“And then we’ll see the fight for acres [soy and corn planting acreage] in North America, and we need to see that crop get planted and developed appropriately,” Heckman said.
With both corn and soybean futures prices reaching multi-year highs in early 2021, the analysts expect combined record acreage of over 185 million acres in the US for the two crops in the 2021-22 marketing year.
Usually, higher crop acreage and output projections put pressure on prices and margins. But Bunge sees higher profitability in 2021 with the higher output forecast amid abating global oilseed stocks.
Brazil, the world’s top soybean producer and exporter, had no soybeans left to sell as of early February. The country did not export any soybeans in the first week of February, compared with almost 1 million mt in the same period last year, according to a foreign trade department report released Feb. 9.
There is virtually nothing left from old crop soybeans as Brazilian farmers sold the majority of their stocks in the first half of 2020, backed by a weak currency and robust demand from China, analysts said. The sluggish pace of soybeans’ new crop harvest has further deepened the tightness in supply.
Alongside Brazil, the tight supply situation is also likely to hit the US and Argentina.
While Argentina’s soybean output is forecast to fall on drought, US soy has virtually exhausted its 2020-21 stocks on a high domestic crush and robust China demand, analysts said.
According to the USDA, the ending stocks for US soybeans in 2020-21 are forecast at a seven-year low of 3.25 million mt.
Bunge said he sees strong China demand driving global soybean market in 2021.
Echoing the sentiment, S&P Global Platts Analytics projected China’s soybean demand in the 2020-21 marketing year (October 2020–September 2021) at a record level of 100 million mt on swifter than expected hog herd recovery from the African swine fever epidemic.
The world’s largest pork producer and consumer is likely to fully recover from ASF in the first half of 2021, according to China’s Agricultural Ministry.
ASF emerged in China in August 2018, resulting in the loss of over 50% of its swine population. Following large-scale quarantine measures, over 200 million pigs were culled that year, leading to a massive shortage of pork in the country and record pork prices.
China’s pig farming sector has experienced a rapid consolidation since late 2019 as small-scale farms were amalgamated into big entities under a government directive and over $30 billion invested in the consolidation, a China-based consultancy said.
Despite the coronavirus-led supply chain disruptions, Bunge posted stronger-than-expected fourth-quarter earnings on Feb. 10 amid strong oilseed processing margins and robust North American exports.
“Agribusiness closed out an excellent year with a very strong fourth quarter,” Bunge’s Chief Financial Officer John Neppl said. Higher oilseeds results were primarily driven by soft seed processing, where earnings were higher in all regions, driven by robust veg oil demand and record capacity utilization, he said.
Bunge’s reported Q4 earnings per share was $3.74 compared to a loss of $0.48 in Q4 2019, Neppl said. The adjusted EPS was $3.05 in Q4 versus $1.69 in the prior year, he added.