UBS Global Soybean Model: Short-term view on Brazil and US soybean prices We take a deep dive into the fundamentals of soybeans, explaining the main factors influencing supply and demand, as well as expectations regarding soybean future prices. We developed a proprietary soybean price model, including our own assumptions on key variables, to forecast soybean prices for the next six months. We project prices to be relatively flattish in the short term, although still at high levels. We believe soybean yield and increasing demand will remain the key drivers for soybeans.
Main highlights of the soybean industry Soybeans are the leading source of animal feed globally, as well as a source of human consumption, while being used for biodiesel and other industrial applications. Soybeans are among the most significant commodities, with roughly a 10% share among traded agricultural commodities and around 20% of planted area globally.
Global soybean supply and demand outlook Soybean supply and demand are the main factors driving soybean prices. Global soybean supply is based on acreage and productivity, which may be impacted by input prices and rainfall levels. Meanwhile, demand is related to global soybean crush consumption and exports, mainly driven by changes in protein consumption, biofuel and FX. Since soybean grains produce a regular crush output of soybean meal (~80%) and soybean oil (~20%), prices are highly influenced by the volume of each soybean by-product. Currently, soybean prices remain at a historical high, mainly on solid demand for soybean oil and meal, low stocks and BRL devaluation.
Brazil and US soybean production and exports Brazil reached record soybean output in the 2020/21 harvest, with total output of 144m tons and 5% YoY growth. However, exports fell 9% YoY in this period on a delayed harvest and as farmers did not sell stocks throughout the year amid volatile prices. Brazilian producers expect prices to continue trending at highs, as stocks worldwide are being consumed and there are prospects of improved but still-low supply from the US for the 2021/22 crop, after Hurricane Ida and drought in the US Midwest. For next season, the USDA estimates a 5% YoY increase in US output to 120m tons, albeit with exports declining roughly 10% YoY on a lower export pace for the 2021/22 harvest and lower soybean production, resulting in higher end stocks, pressuring prices up.
