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Soybean Surges to Four-Month High Over US Output Uncertainty

July 6, 2020 at 17:05 by Andrew Moran

Soybean futures are trading at their best levels in four months over concerns about US production. With hot and dry weather coming to key soybean-producing markets, analysts are anticipating a lower-than-expected harvest, which would affect supplies and potentially impact exports.

November soybean futures advanced $0.11, or 1.23%, to $9.0775 per bushel at 16:50 GMT on Monday on the Chicago Board of Trade (CBoT). Soybean had an impressive holiday-shortened trading week, gaining more than 5%. But prices are still down more than 5% year-to-date.

The latest weather forecasts suggest that hot temperatures and dry conditions could engulf the Midwest over the next ten days. Should unfavorable crop weather be the norm this summer, it could threaten soybean yields, and this would inevitably lift prices.

Traders will be keeping a close eye on the US Department of Agriculture’s (USDA) weekly crop condition ratings report. This could help investors decide how much of a weather premium will be added to soybean futures in the coming weeks.

The global soybean market maintains one of the tightest balance sheets, so any disruption to output levels would have a major impact on prices.

Meanwhile, the USDA announced that exports reached agreements to sell 264,000 tons of old-crop soybeans more than 200,000 tons of new-crop corn to China. Exporters also struck deals with Mexico for the 2020–2021 and 2021–2022 marketing seasons.

In other industry news, there has been renewed interest in soybeans via the exchange-traded fund (ETF) market. According to the most recent data, the Teucrium Soybean Fund reported a significant uptick in trading activity, climbing to approximately 600,000 on Tuesday. To put this into context, the daily average is around 61,000.

Investors have ostensibly turned bullish on higher Chinese demand. The world’s largest soybean importer has been restocking its inventories of grains after the US-China trade war wiped out its inventories. Plus, China has been moving past the swine flu outbreak that forced farmers to cull tens of thousands of pigs. Now that farmers have been adding to their pig populations to meet increased demand levels for pork, soybean consumption is booming again.

In other energy commodities, August corn futures picked up $0.0325, or 0.95%, to $3.4675 per pound. August wheat futures added $0.025, or 0.51%, to $4.945 a bushel. September coffee futures tumbled 0.0054, or 5.23%, to 97.80 cents per pound.

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