NAPERVILLE, Illinois, June 1 (Reuters) - Booming soybean demand from China early this century drove extensive crop expansion across the Americas, but while production is set to swell even further in top exporter Brazil, growth in Chinese imports has cooled.

That dynamic is seen lifting world soybean stocks to all-time highs by mid-2024, including above-average but not record stocks-to-use, which measures supply against demand.

Global soybean prices have fallen significantly in the last few months and are well below the levels of the last two years. But if prices continue their fall, Brazilian farmers may be less incentivized to boost the area when planting begins later this year, especially if the top importer is less engaged.

Brazil’s 2023 soybean harvest, estimated by the U.S. Department of Agriculture at 155 million tonnes, topped the prior record by 11%. Production had never exceeded 100 million prior to 2017, though USDA sees the 2024 crop jumping to another new high of 163 million tonnes.

That includes a 4.3% expansion of harvested area, just under the recent five-year average of 4.5%. Current economics suggest 2024 soybean profitability in Brazil could return to the lower levels of the late 2010s, when the average yearly area expansion was below 3%.

Brazilian farmers have been slow to sell the 2023 soy crop amid easing prices, and 2024 may be less exciting. Producers in top grower Mato Grosso had sold just over 9% of their 2024 soybeans as of early May, the smallest portion in over five years and below the average and year-ago 23%.

The last time Brazil harvested fewer soy acres than in the previous year was in 2006-07, so acres are likely to increase, though the degree is questionable.

No. 2 soy exporter the United States is currently slated for a record 122.7 million tonnes in 2023, included in the 2023-24 marketing year along with the 2024 Brazilian and Argentine harvests. A return to average yields in Argentina in 2024 could produce a crop nearly twice as large as this year’s drought disaster.

Strong 2023-24 harvests in the three bean exporters could raise global production nearly 11% from this year, the largest annual increase in seven years.

China’s soybean imports increased five-fold throughout the first decade of the 2000s, but demand growth began steadying off later in the 2010s. The 2018-19 African swine fever outbreak in China’s hog herd highly disrupted soy consumption, though recovery has been somewhat lackluster ever since.

The 2018-19 fall in soy consumption was China’s first yearly drop in 15 years, though another decline was seen in 2021-22. China’s zero-COVID policies and economic slowdown, poor profitability for Chinese hog producers, a weak crop from Brazil and near-record mid-2022 soybean prices all contributed.

USDA last month set China’s 2023-24 soy imports at 100 million tonnes, up from 98 million in 2022-23 but only barely above the prior record of 99.7 million from 2020-21. That would be 7% higher than in 2016-17, though the 2023-24 global crop is seen 17% larger than in that year.

Domestic demand is forecast to rise 4.7% to a record 118 million tonnes in 2023-24, the biggest increase in four years though weaker than the projected global demand increase of 5.9%, a nine-year high. China’s soybean consumption had been rising more than 8% per year in the mid-2010s.

China for a couple of years has been reducing guidelines on soymeal use in animal feed in an effort to curb reliance on imports. As of last month, excessive, cheap wheat supplies in China had been replacing corn and soymeal in feed rations, lowering corn and soy import needs.

But ongoing torrential rains in China’s heaviest wheat-producing province may have damaged up to 20 million tonnes of the grain, a significant portion of the expected 137 million-tonne crop.

That wheat would not be suitable for human consumption, though sprouted grains can be used in livestock rations if not excessively damaged, potentially putting even more pressure on China’s soybean and corn demand.

Karen Braun is a market analyst for Reuters. Views expressed above are her own.

Our Standards: The Thomson Reuters Trust Principles.

Thomson Reuters

As a columnist for Reuters, Karen focuses on all aspects of the global agriculture markets with a primary focus in grains and oilseeds. Karen comes from a strong science background and has a passion for data, statistics, and charts, and she uses them to add context to whatever hot topic is driving the markets. Karen holds degrees in meteorology and sometimes features that expertise in her columns. Follow her on Twitter @kannbwx for her market insights.