Commodity Blog

Soybean futures rallied on Tuesday as deteriorating crop conditions and rising Chinese demand elevated the agricultural commodity. Soybean prices have been advancing over the last three months as importers take advantage of a weaker US dollar, but American farmers are facing tough competition from their Brazilian counterparts, who are enjoying record harvests and ballooning demand.

November soybean futures surged $0.135, or 1.49%, to $9.1925 per bushel at 18:10 GMT on Tuesday on the Chicago Board of Trade (CBoT). The crop has had a strong August, rising more than 2%, but it is still down nearly 4% year-to-date.

According to the US Department of Agriculture (USDA), 69% of domestic soybeans were rated in good-to-excellent condition, down from 72% in the previous week. Many analysts had anticipated deterioration in ratings due to dry conditions in the Midwest.

In a separate report, the USDA confirmed that Chinese importers acquired more US soybeans as Beijing tries to reaffirm its commitment to the phase one trade agreement with Washington. The USDA also noted that Chinese buyers booked their biggest one-day corn importers in close to a month.

The news comes as senior US and Chinese officials spoke over the telephone on Monday. The two sides are working to resolve problems over the deal as China is ostensibly falling behind on meeting the provisions of the arrangement. Beijing and Washington said that they are committed to the success of the first phase, although neither side alluded to a second phase.

It should be noted that China imported scooped up more Brazilian soybeans last month as the real continued its slump. Beijing imported 8.2 million metric tons of soybeans in July, up 28% year-on-year. In addition to a lower real, Brazil soybeans were selling at a discount of ten cents per bushel. The real has lost about 40% of its value against the greenback over the last 12 months.

Bloomberg recently reported that Brazilian farmers are selling their soybeans two years in advance. As farmers attempt to remove uncertainties and use the falling real to their advantage, they sold 43% of their 2020–2021 crop through August 7.

A lower buck is good for dollar-denominated commodities because it makes it cheaper for foreign investors to purchase.

In other agricultural markets, November corn futures rose $0.09, or 2.61%, to $3.54 per pound. November wheat futures added $0.0775, or 1.47%, to $5.35 a bushel. December coffee futures picked up $0.0125, or 1.02%, to $1.242 per pound.

If you have any questions and comments on the commodities today, use the form below to reply.