After the U.S. Department of Agriculture cut its projections for U.S. soybean production (by 70 million bushels, to 4.276 billion) and carryout (by 10 million bushels, to 210 million) on Jan. 12, the March soybean contract lifted above the US$15 per bushel mark.
Only six days later, the psychological $15.50/bu. level proved too much for traders, at least for now.
The March soybean contract hit a high of $15.485/bu. a few minutes after midnight on Jan. 18. Twelve hours later, a broad commodity sell-off on the Chicago Board of Trade, as well as forecasts showing precipitation in drought-stricken soybean growing areas of Argentina, brought the price down to $15.1125/bu. The price would rebound to a close of $15.245/bu., but soybeans’ decline continued the next day, with the March contract closing at $15.1475/bu.
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Prices have remained above their 50- and 100-day moving averages since November, but it’s difficult to say which way they will go next.
South America has been the focus for soybean buyers over the past month, with the continent’s two largest crops going in opposite directions.
In Argentina, dry conditions have caused repeated cuts to production estimates. USDA is projecting 45.5 million tonnes, while crop consultant Michael Cordonnier cut his estimate to 39 million on Jan. 17.
Meanwhile, Brazil is slated for a record crop, estimated at 153 million tonnes by USDA and 151 million by Cordonnier, despite above-normal rainfall in some areas. ANEC, a Brazilian trade group, has reported sales of Brazilian soybeans to Argentina, which are unusual for this time of year.
World Weather Inc. reported Jan. 19 that Argentina’s soybean growing regions “will improve over the next two weeks” with the arrival of much-needed moisture. However, current crop conditions may leave some to wonder if the rain is coming too late.
Argentine soybean plantings are already 88 per cent complete compared to 97 per cent one year ago, but only four per cent of this year’s crop is rated good to excellent, while 56 per cent is rated poor to very poor.
Brazil’s crop could offset any production cuts from Argentina and the U.S., limiting the upside for soybean prices. However, demand for soyoil and soymeal could also be a determining factor, which has its own uncertainty.
The National Oilseeds Processors Association reported a 177.5 million bushel crush in December, 4.8 per cent lower than in December 2021 and 4.4 million bushels less than the average trade estimate. Soyoil stocks were at 1.791 billion pounds, higher than expected, but 240 million below December 2021’s total, while soy crush margins remain elevated.
An anticipated rebound in Chinese demand for commodities later this year would raise prices, but 1.5 million to two million tonnes of cheaper Indian soymeal are also projected for export, compared to 644,000 tonnes in 2022. The influx of Indian soymeal could pose a threat to U.S. crush demand and pull prices downward.
Canola, with its own high crush margins, has been largely immune to soybeans’ price swings, trading between $800 and $900 per tonne since late November due to a relative lack of concern over the carryout and seeded acres. Soybeans are more volatile and wide-ranging factors could have outsized effects on prices.
If soybean production in any one of Argentina, the U.S. or Brazil doesn’t appear to meet expectations, $15.50/bu. may become less of a ceiling and more of a floor.
