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Global Soybean Market Review: Prices in US likely to remain Firm in Future

Abhijeet Banerjee
Abhijeet Banerjee

Soybean futures prices on the Chicago Exchange i.e. CBOT had peaked at $10.00/bushel in mid-September, eventually topping at $10.44/bushel on September 18, before falling back to just below the $10.00 dollar mark at the end of the same month. Subsequently, prices rallied again to near $10.50/bushel following the release of the September Grain Stocks report and increasing pace of US export sales. US Soybean prices are currently up nearly 30 percent, versus prices averaging during early part of August month. Strong demand recovery in China for U.S. soybeans and limited availability of exportable supplies in South America resulted in firming price levels between Middle of August to Mid-September.  

Imports from China has increased this year following in rebound of China’s pork sales as the country saw easing African Swine Fever and the import volume was up 8.4 million tons during for January to August period, and as compared to last year corresponding period imports have surged by 15% nearly. Most of the imports from China were from Brazil, where exports to all markets (January-September) were up 30 percent year-over-year to a record 79.2 million tons. Export sales have improved significantly in 2020 mainly due to robust Chinese demand. 

Cheapening Brazilian currency has been a driving factor in pushing up exports from the country, and this has also resulted in exhaustion of exportable supplies. Now there are projections of Brazilian imports to increase to record high level since 2003. All in all, Brazil soy oil prices had jumped to a 6-year high in September, owing to tight supplies and strong biodiesel as well export demand. As a result Chinese importers in recent months were forced to shift their purchases towards U.S. markets. As per the USDA, the outstanding sales to China in mid-September totaled nearly 17.0 million tons, nearly equal to the record set in 2013. Total outstanding sales for all markets in mid-September, including unknown destinations, is at a record 32.0 million tons, a three-fold increase compared to 2019.

Weather related problems in USA led to reductions in forecast of soybean production of late. As a result the forecast of US ending stocks has been lowered when compared with the 2019/20 ending stocks. So in case the current La Niña weather pattern leads to drier conditions in South America then it would mean greater possibility of global supplies tightening in 2021, which would be positive for global price movements in future. Some analysts are of the opinion that soybean inventory in China are currently high, when compared with 2018 level, hence the upside movement may be capped for some period. Crushing of Soybean was lower in South America in the month of September on the back of rising Soya Oil prices amid stronger demand (during the mentioned period). Depleting U.S. Soybean Inventory and recovery in Chinese demand are likely to keep average prices in the country, well above the lower levels observed in 2019 and early part of 2020. It may be noted that this is the first time soybean futures prices in the US have reached the $10.00 mark since early June 2018.

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