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Soybeans Target $13 on Bullish Chinese Demand Forecasts, US Exports

December 29, 2020 at 18:18 by Andrew Moran

Soybean futures are targeting $13 during the quiet holiday trading week, buoyed by bullish forecasts regarding Chinese demand and new US government data highlighting impressive export sales. Soybean prices have been on a tear since experiencing a modest correction at the start of December, adding to their impressive 2020 gains.

March soybean futures spiked $0.2825, or 2.25%, to $12.855 per bushel at 16:53 GMT on Tuesday on the Chicago Board of Trade (CBoT). Despite sliding 2% to kick off December, the crop is up 8% this month. Year-to-date, soybean has soared 35%.

According to the US Department of Agriculture (USDA), private exporters reported 233,700 metric tons of soybeans for delivery to unknown destinations during the 2020–2021 marketing season and 125,000 metric tons during the 2021–2022 marketing year. The USDA also confirmed export sales of 149,572 metric tons of corn for delivery to unknown destinations during the 2020–2021 marketing year.

In a separate report, the USDA confirmed that US export inspections for soybeans came in at 1.4 million tons for the week ending December 24. This was the lowest number of inspections since September, and it fell short of market forecasts.

Market analysts believe that there could be a commercial buying frenzy over the next couple of weeks on expectations of higher prices, particularly with dry conditions continuing to ravage Brazil and Argentina. With inflation anticipated for next year due to fiscal stimulus and monetary expansion, international investors might consider agricultural commodities as a reliable hedge against inflation.

Industry observers believe that China’s soybean demand will extend beyond the first quarter due to recovering swine inventories and domestic stockpiles. During the 2020–2021 season, Chinese demand skyrocketed to an all-time high of 100 million metric tons, and some projections suggest Beijing could replicate this figure next year.

China’s ending stocks for 2019–2020 were up 38% year-over-year to 26.8 million metric tons.

Investors are also paying attention to a labor strike unfolding in Argentina that backed up 140 export ships. The government is hosting negotiations to establish an improved 2021 compensation package.

Bob Linneman, Kluis Advisors, said in a year-end research note:

This year-end position squaring (‘window dressing’) should be expected after the wild rally grains have seen. It does seem as though yesterday’s price action could have been linked to funds unwinding long soybeans and short corn. Recall a few weeks ago we discussed the scenario that soybeans had a better chance to post a bigger dollar amount rally than corn. That idea opened the door for funds to buy soybeans and sell corn as a spread trade.

In other agricultural commodities, February corn futures rose $0.0975, or 2.14%, to $4.6625 per pound. February wheat futures added $0.0575, or 0.85%, to $6.195 a bushel. March coffee futures dipped $0.005, or 0.04%, to $1.2535 per pound.

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