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Soybeans Top Six-Year High on Strong Chinese Demand, Tightening US Stocks

December 22, 2020 at 20:07 by Andrew Moran

Soybean futures settled at their best levels in more than six years, buoyed by estimates that highlighted China imported a record number of soybeans this year. Crop prices received another shot in the arm when the US government reported that domestic inventories tightened amid ballooning demand. How soon could the agricultural commodity test $13?

January soybean futures rose $0.04, or 0.32%, to $12.515 per bushel at 17:52 GMT on Tuesday on the New York Mercantile Exchange. Soybean prices are on track for a weekly gain of about 7%, adding to their year-to-date spike of nearly 31%.

According to Beijing’s leading state-owned grains trader COFCO, China acquired more than 100 million tons of soybeans in 2020, an all-time high.

Zhou Jishuai, deputy general manager of the hedging and trading department of COFCO Oils and Oilseeds, told a conference in Guangzhou that the world’s biggest soybean consumer crushed 92.6 million tons of the bean this year. The purpose behind the ballooning demand is two-fold: China is rebuilding the nation’s hog herd after the African swine flu that ravaged supplies and the central government is adhering to the provisions inside the US-China phase-one trade agreement.

He also anticipated that soybean demand would remain strong heading into the first quarter of 2021.

In its recent December Supply/Demand and Crop Production Reports, the US Department of Agriculture (USDA) reported that domestic inventories of soybeans are running low due to soaring foreign demand. Ending stocks are projected to be 175 million bushels lower to around 1.69 billion bushels.

After imposing a duty on wheat exports, the Russian government announced that it would be imposing an export tax on soybeans. The purpose is to rein in increasing food prices and secure domestic stocks. The problem, however, is that farmers are anticipated to produce less. Plus, output levels among farmers in the country’s eastern region would slide and hurt shipments to Chinese neighbors.

In other agricultural commodities, January corn futures added $0.025, or 0.57%, to $4.425 per pound. January wheat futures picked up $0.0475, or 0.78%, to $6.16 a bushel. March coffee futures settled down $0.0025, or 0.2%, to $1.2445 per pound.

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