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Soybean Retreats From Seven-Month High Despite Chinese Demand, USDA Ratings

August 18, 2020 at 16:36 by Andrew Moran

Soybean futures are retreating from seven-month highs, despite surging Chinese demand and a decrease in the US government’s crop ratings. Soybean prices recently have rallied about 4% over the last week, topping $9 since the beginning of July. With a weakening US dollar, could American farmers see rising foreign demand?

November soybean futures fell $0.025, or 0.27%, to $9.1275 per bushel at 15:55 GMT on Tuesday on the Chicago Board of Trade (CBoT). Many had anticipated a big year for soybean prices because of the US-China phase one trade agreement, but the coronavirus changed the global economic landscape. Year-to-date, soybean is down roughly 4.5%.

According to the US Department of Agriculture’s (USDA) weekly Crop Progress report, 72% of the soybean crop was rated good to excellent condition for the week ending August 16, a drop of 2% from the previous week. Analysts are warning that next week could see a decline in ratings because of forecasts for dry weather in the Midwest.

Last month, China’s soybean imports were the second-highest on record as the world’s biggest customer imported 10.09 million tons, up from 8.64 million tons at the same time a year ago. Experts predict that imports will remain strong in August, with imports potentially topping 96.5 million tons for the 2019–2020 marketing year.

While Beijing has been acquiring from Brazil amid the weaker real, the data highlight a shift to US soybeans. China will still need to acquire 26 million tons of soy this year as the country has only reached 20% of its 2020 obligations.

As the greenback continues to deteriorate, market observers are anticipating greater foreign demand. The US Dollar Index, which gauges the buck against a basket of currencies, has 0.56% to 92.33, from an opening of 92.82. The index has plunged more than 7% since May, bringing its year-to-date loss to 4.2%. A lower greenback is good for dollar-denominated commodities because it makes it cheaper for foreign investors to purchase.

In other agricultural markets, September corn futures fell $0.035, or 1.02%, to $3.4125 a pound. September wheat futures shed $0.105, or 2%, to $5.1575 a bushel. December coffee futures surged $0.0325, or 2.77%, to $1.2075 a pound.

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