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Soybeans Retest $12 As Analysts Debate if Rally Could Soon End

November 27, 2020 at 19:07 by Andrew Moran

Soybean futures are retesting the key $12 mark to close out the trading week. But as soybean prices flirt with their best levels in about six years, there is some concern that agricultural commodity’s rally is about to come to an end. Why? The world’s top consumer, China, could be in the beginning stages of winding down its purchases of the crop.

January soybean futures tacked on $0.0925, or 0.78%, to $11.9325 per bushel at 17:55 GMT on Friday on the Chicago Board of Trade (CBoT). Soybeans will enjoy a weekly gain of 1.3%, adding to their year-to-date surge of nearly 25%.

According to an exclusive report from Reuters, an increasing number of Chinese soybean importers and processors are seeking to end their agreements with American and Brazilian shipments. The newswire reported that the cargoes are scheduled to arrive in China in December and January.

Crush margins have turned negatives, so smaller private soybean importers are attempting to limit shipments in December and January. Many of these importers also did not set the price in the futures market.

Beijing has been acquiring soybeans from US and Brazilian farmers at a record pace this year. China is trying to meet the provisions inside the phase-one trade agreement, while also taking advantage of the Brazilian real‘s weakness in foreign exchange markets.

Over the last five months, China has accounted for more than 60% of shipments in the global marketplace.

This is an important development in the global soybean market because US farmers have increased their output by 40% in 2020 as part of efforts to meet demand, especially coming from China. At the same time, Brazil has enjoyed record harvests and exporters have offered discounts for their crops. Overall, supply has ballooned this year, but it has not had a negative impact on prices because demand – from both China and the rest of the globe – has been strong.

A weaker US dollar and a real has also contributed to the strengthening demand for soybeans.

In other agricultural commodities, January corn futures added $0.0775, or 1.81%, to $4.3525 per pound. January wheat futures picked up $0.105, or 1.76%, to $6.07 a bushel. March coffee futures settled relatively unchanged at $1.2425 per pound.

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