Commodity Blog

Soybean futures are trading at their best levels in two years as the US government slashed its domestic supply forecast. The agricultural commodity has continued to trade above $10 for most of October, and soybean prices are looking to test $11 in the second half of the month. With foreign demand remaining strong and the greenback slumping again, could the crop surge to a six-year high?

November soybean futures advanced $0.0675, or 0.65%, to $10.405 per bushel at 15:47 GMT on Tuesday on the Chicago Board of Trade (CBoT). Soybean has been one of the top-performing commodities since July, rallying nearly 19%. Year-to-date, soybean prices are up close to 9%.

The US Department of Agriculture (USDA) released its revised forecast for soybean inventory. The agricultural department projected that soybean supplies would be smaller than previously expected, alluding to adverse weather conditions that could impact the acreage that farmers would harvest.

According to the USDA’s monthly World Agricultural Supply and Demand Estimates Report, soybean stocks are anticipated to slide to a five-year low, driven primarily by ballooning exports. Overall, domestic soybean stockpiles are tightening, while Brazilian output is being threatened by dry weather. The US is expected to produce 4.26 billion bushels for the 2020–2021 marketing season, lower than last month’s estimate of 4.31 billion bushels.

Both producers could continue to benefit from weaker currencies. Each nation has an advantage over the other: the US is in a phase-one trade agreement with China, while Brazilian exporters are providing a discount to importers. In global markets, soybean ending stocks are pegged at 88.7 million metric tons, a decline from the 93.6 million metric tons in September.

Meanwhile, in the USDA’s weekly crop progress report, 63% of soybeans are rated in good-to-excellent condition, and 61% of the corn crop is rated in good-to-excellent condition.

A strengthening greenback is putting a lid on soybean’s increase on Tuesday. The US Dollar Index, which gauges the greenback against a basket of currencies, rose 0.48% to 93.52, from an opening of 93.03. A stronger buck is bad for dollar-denominated commodities because it makes it more expensive for foreign investors to purchase.

In other agricultural markets, November corn futures picked up $0.0275, or 0.71%, to $3.9175 a pound. November wheat futures fell $0.01, or 0.17%, to $5.9525 per bushel. December coffee futures surged $0.012, or 1.1%, to $1.1035 a pound.

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