Demand, Ending Stocks Key to Variation in Brazil Soy Production Estimates

A major revision to historical Brazil production and use data is needed for the USDA and its Brazilian equivalent Conab to reach a consensus on the true size of the 2023-24 Brazilian soybean crop. 

In a Farmdoc Daily article earlier this week, Joe Janzen, Joana Colussi, and Scott Irwin of the Department of Agricultural and Consumer Economics, University of Illinois, delved into the possible reasons why the USDA’s estimate of the 2023-24 Brazil soybean crop is so much higher than Conab’s. 

While both agencies have revised their 2023-24 estimates lower over time, USDA has kept its number comparatively higher. Since last October, Conab has lowered its soy production estimate to 146.5 million tonnes from 162 million, while the USDA number has fallen to 155 million from 163 million. At 8.5 million tonnes, the current gap between USDA and Conab is wider than ever before. 

Although differences in forecasting methods may explain some of the USDA-Conab divergence, the authors maintained the differences in USDA and Conab production estimates are unlikely to be explained by further investigation into those methods.  

“Knowing the relative emphasis each agency places on on-the-ground field scouting, satellite imagery data, or any other information is unlikely to lead to a consensus production estimate. The difference between USDA and Conab yield estimates has been remarkably similar for the past three crop years despite significant yield variability over the same period.” 

Instead, the authors said current production estimates can only be understood in relation to demand and ending stocks estimates, which have also differed between USDA and Conab.  

If USDA wishes to follow Conab and other private forecasters who believe Brazil soybean production is less than 155 million tonnes, it must find corresponding decreases in demand. According to USDA, the use data it reviews “suggests this cannot be the case, so its production number must remain higher.”