Soybean commentary: Futures surge to highest since Sept 2012
Soybean futures prices on the Chicago Mercantile Exchange climbed to their highest level since September 2012 after traders positioned themselves ahead of the World Agricultural Supply and Demand Estimates (Wasde) May report and against a backdrop of continued tight bean supply
This article was first published to Agricensus.com on May 12, 2021.
The front-month July contract had soared by 2.1% to $16.48 per bushel on May 12, so the contract gained 4.2% over the past two sessions, bolstered on Wednesday May 12 after the United States Department of Agriculture’s (USDA) Wasde delivered on analysts’ expectations.
Although the agency reported US ending soybean stocks above market expectations for both the 2020/21 and 2021/22 fiscal years, at 120 and 140 million bushels, respectively, inventories should remain tight into 2022.
According to the monthly China Agriculture Supply and Demand Estimates (Casde), Chinese soybean production will fall 4.8% year on year to 18.65 million tonnes during the 2020/2021 marketing year - which runs from October to September - due to farmers’ shift to corn. Casde has also estimated the growth of China’s soybean imports would slow down amid a gradual recovery in the pig herd.
China is the world’s biggest consumer of pork, and the pig herd literally refers to the millions (if not billions) of pigs that are raised each year to meet that demand. The size of the pig herd directly correlates with how much soybeans and corn are imported to feed them. The herd is in recovery after the outbreak of African swine fever in 2018 - the first of two pandemics that originated in China - and caused the loss of many pigs round the world due its rapid spread. At one point, up to half of China’s new piglets succumbed to the disease, with the herd number falling significantly.
Brazilian food agency Conab estimated its 2020/21 corn output would fall by 2.5 million tonnes to 106.4 million tonnes on expectations of a falling corn yield for Brazil’s largest wheat crop, safrinha, during its second sowing. The second crop of safrinha corn has just finished being planted and is growing right now, but dry conditions across many of the key areas are likely to hold back development, which will hit yields and hinder production.
Brazil’s soybean production should decline marginally from 135.5 million tonnes to 135.4 million tonnes, which is still an all-time high and 8.5% or 10.6-million-tonnes higher on the year, Conab’s estimates show.
Looming strike action from workers at Brazil’s Santos port was averted after the union pushed its possible strike to June amid concerns about securing enough Covid-19 vaccinations for workers.
Brent crude oil is on track for its highest close in nearly two months amid positive demand outlooks from Oil Producing and Exporting Countries (OPEC) and the International Energy Agency (IEA), with the increase, in turn, supporting the oilseeds market complex.
After dipping to almost 90 on Tuesday, the US dollar index notched a daily gain to come in above 90.70 on Wednesday May 12, after a surge in value following a greater than expected increase in US consumer prices.
Brazilian soybean premiums slid further while CME soybean futures prices skyrocketed, with June shipments in the Paranaguá paper market dropping by 9 cents per bushel over the day to be valued at -49 cents per bushel over July futures and equating to $587.25 per tonne.
An unconfirmed trade was heard for June delivery at minus 50 cents per bushel over July futures while rumours that July and August deliveries would go for -35 cents and -45 cents per bushel over July and August futures, respectively.
In Argentina’s fob market, premiums for June shipments remained steady at -66 cents per bushel over July futures, equating to $581 per tonne while the remainder of the forward curve increased by 3-6 cents per bushel.
In the cfr China market, the negative crush margin continued to constrain Chinese crushers’ buying but the margin has narrowed from August and become positive for January and March 2022.
Soyoil futures on the Dalian Commodity Exchange reached their highest level for June and July contracts, with both up by 4% to 9,420 yuan per tonne ($1,462) and 9,220 yuan per tonne ($1,431).
Meanwhile, the dry bulk freight cost of soybean in the Pacific jumped amid a surge in coal shipments, therefore, Fastmarkets Agricensus’ APM-6 cfr China marker for June shipment was assessed at $1.25 per bushel over the July contract, equivalent to $630.50 per tonne.
Fastmarkets’ Agriculture customers can also receive the following data set: AgriCensus Soybean Price Assessments May 12, 2021. Subscribers click here.
By Cai Chen and Eduardo Tinti