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Soybean Surges 1% on Demand Hopes, USDA Supply Forecast

April 29, 2020 at 18:31 by Andrew Moran

Soybean futures surged as much as 1% in the middle of the trading week, primarily driven by renewed demand hopes and the US government’s recent agricultural outlook for the upcoming marketing season. As more countries begin to reopen their economies gradually, investors are optimistic that demand could balloon, especially from the world’s top consumer: China.

July soybean futures advanced $0.0625, or 0.75%, to $8.385 per bushel at 18:05 GMT on Wednesday on the Chicago Board of Trade (CBoT). Year-to-date, soybean prices have slumped more than 12%, and they were trending downward even before the coronavirus pandemic wreaked havoc on global financial markets.

The US Department of Agriculture (USDA) recently released its Agricultural Outlook report for the 2020/2021 marketing season. It projects that soybean acreage will jump by 10% to about 83.5 million acres, and the estimated yield per acre is just under 50 bushels. Overall, if these forecasts are accurate, American soybean output could rise 18% year-over-year.

Although US farmers are looking to stage a comeback after two disappointing years, Brazil is still viewed as a force to be reckoned with – for now. According to new data from shipping agency Williams, Brazil will be exporting nearly nine million soybeans next month, and more than half (53%) of the cargoes will be heading to China.

Brazil’s global shipments hit a new record high in April, totaling 13.2 million metric tons. This represents a 13.4% increase from the same time a year ago.

There are concerns that China will not meet the provisions of the US-China phase one deal since importers are turning to Brazilian products amid lower prices and a weakening real. However, the latest government data has shown that the world’s second-largest economy has booked three orders before the end of the 2019–2020 marketing season, lifting the total orders to more than 12 million tons.

Moving forward, investors are watching demand volumes as more jurisdictions reopen their economies in the aftermath of the COVID-19 crisis. President Donald Trump issued an order to keep meat factories open to secure the food supply chain. A couple of processing plants shut down due to several internal cases of the coronavirus, but now they are reopening and will restart operations as soon as possible.

In other agricultural commodities, June corn futures rose $0.025, or 0.8%, to $3.145 per pound. June wheat futures shed $0.0975, or 1.85%, to $5.1675 per bushel. July coffee futures were relatively unchanged at $1.052 a pound.

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