Metric loss

What does Brazil’s 139 million metric tons of soybeans represent in real money?

Well, when there are 2,204.6 pounds per metric ton and 60 pounds per bushel of soybeans, then there are 36.74 bushels of soybeans per metric ton. One million metric tons (mmt) equals 36.74 mb, more than Pennsylvania’s annual production. (For 56 pound test weight corn, there are 39.37 bushels per metric ton and 1 mmt equals 39.37 mb.)

Therefore, a single sale of 507,000 metric tons of soybeans equals almost 20 mb. That’s enough to fill eight Neo-Canal ocean-going ships, the largest dry bulk carriers that can pass through the expanded Panama Canal, carrying about 2.5mb each (68,000 metric tons of cargo). A more typical one-day sale (132,000 tonnes) is enough to fill two dry bulk carriers. All of the 2021 U.S. soybean production would fit into 1,812 Neo-Canal vessels. Anyway, Monday’s huge sale was spread over two years of marketing, so let’s assume it represents four big boats full of old crop soybeans and four big boats full of new crop soybeans. .

I’ve been watching the Winter Olympics lately, and while it pains me to understand temperature in degrees Celsius or the speed of skiers in kilometers per hour, I understand that metric units are important, because it’s is how we communicate globally. information in a fair way that everyone can share. It is very good.

However – and I might be embarrassed to admit it – even after analyzing these markets for the past 15 years, I still don’t really know how I feel when I hear about a “5 mmt” of Brazilian soybean production. , as seen in the January report on World Agricultural Supply and Demand Estimates (WASDE). Is it a lot? Is it a little? My bushel-obsessed American brain just can’t figure it out without the help of a spreadsheet. Now the USDA will release another set of global production projections this Wednesday in its February WASDE. They are expected to cut Brazilian soybean production again, this time with a drop of 6mmt from 139mmt to 133mmt. The accumulation of damage from the La Nina drought will likely also be recognized with a further reduction in Argentina’s soybean production (from 49.5 mmt in December to 46.5 mmt in the January WASDE report, to potentially 44.2 mmt in the February estimates).

What influence will these figures have on the global global market?

If Argentina lost 5.3 million tons of soybean production potential in the last two months of drought, that is equivalent to losing 195 million tons. Meanwhile, Brazil’s soybean production outlook may have fallen 11mmt from December’s big expectation of 144mmt. In bushel terms, they may have once been looking forward to a 5.3mb soybean crop, but now it may be “only” 4.9mb (still higher than soybean production American of 2021). The La Nina drought may have cost South America over 600MB of total soybeans and, while we’re at it, about 300MB of corn production as well. (Brazil expected the equivalent of a 4.6bb corn crop, but now it looks more like a 4.4bb crop, and Argentina’s 2022 expectation has gone from 2, 1 bb to 2.0 bb corn.)

There is not necessarily a 1:1 relationship between lost production in South America and additional export activity for the United States. Especially if prices become too high, some customers may reduce their consumption or switch to other sources. We cannot make the simplifying assumption that all 600MB lost from original South American expectations will now have to come from US supplies – that cannot be done; we don’t have many soybeans left to share. US soybean carry-out stocks for the 2021-22 marketing year are already projected at a tight level of 350mb.

But now we can at least compare apples to apples and see how a potential 6 mmt cut in Brazilian soybean production in this week’s WASDE report compares to the overall market in bushel terms (6 mmt = 220 mb ). We can visualize it and we can form an opinion on its influence on futures prices.

Elaine Kub is the author of “Mastering the Grain Markets: How Profits Are Really Made” and can be reached at masteringthegrainmarkets@gmail.com or on Twitter @elainekub.