He threatened to react in March and also in May, but Chicago is in the United States and the fate of the beans generated in this country is increasingly complicateda scenario that is transferred to the global balance for the oilseed and affects in one way or another its competitors, Argentina and Brazil.
The explanation regarding the little downward resistance shown by US soybeans It’s not complicated. The price of a commodity traded in this market depends fundamentally on the vision of the funds regarding their future. And that vision is shaped more than anything by the fundamentals, closely linked to supply and demand of the grain in question.
In respect of demand, soybeans have a peculiarity, which lies in having an exclusive buyer: China. The Asian giant accounts for around 60% of global soybean imports. If you have disagreements with your authorities, there is no chance of replacing China with any other buyer, not even a group of buyers.
On this side, two definite drawbacks appear. In principle China is no longer the locomotive that we knew until the middle of the last decade, when we were excited about greatly exceeding 100 million tons of imported soybeans. The famous Chinese rates associated with growth were moderated and the pandemic and post-pandemic did the rest. China is having some economic difficulties, its pig herd is shrinking to support prices, it is cutting the use of soybean meal in rations and it wants to minimize its dependence on grain imports.
The United States adds an additional ingredient: in the times of Donald Trump it began a trade war that is not over yet. After once again enduring a heavy increase in tariffs on its products by the Biden government, Beijing promised revenge. To make matters worse, the prices of Brazilian soybeans are more affordable than those of American beans for much of the year.
So, The Mercosur partner came to hold the lion’s share in this businessas the Stars and Stripes nation loses Compartir accelerated. Fortunately, growing demand for renewable diesel has helped absorb significant volumes of US soybeans for domestic milling. Otherwise the situation would be even more serious.
Anyway This battle front is also getting complicatedbecause imports of used cooking oil – especially from China itself -, bovine tallow and rapeseed oil have slowed the rise of soybean oil as the preferred raw material for the production of green fuel.
The point is that Late in the 2024/25 campaign, China still has not registered US soybeans. An alarming sign indeed. The problem for the United States is that the customer is always right, there is no way to force him to buy, except through seduction, and Biden is doing exactly the opposite, not far from the temperament that Trump adopted a few years ago. Furthermore, the chances of the magnate winning the November elections further darken the outlook.
And the offer? Let us begin by emphasizing that The world does not lack soybeans, nor will it lack them as long as Brazil continues to incorporate new areas into cultivation. The neighboring country has had climatic problems of all kinds, but is having another very good campaign, to which we must add the recovery of the volume produced in Argentina.
As a finishing touch, The planting season is ending in the productive heart of the United States, at a very good pace. The rains of the last two months create an unbeatable scenario for the first stages of the crop. It is known, this implies that an important step has been taken to aim for high yields.
The markets go day by day, and nothing is set in stone. But everything closes to think about a weak global price scenario for soybeans if there are no complications during the US climate. A Brazilian analyst, who has been in Chicago for years, Pedro Dejneka, does not rule out values around USD 360 or something less if the United States has a very good harvest and Brazil aims for 165 or 170 million tons.
Scott Irwin, a specialist at the University of Illinois, in the United States, is clearly bearish. “Unless there is a substantial production problem this summer, I find it difficult to see how to prevent 2024/25 ending stocks from ending up above 13.6 million tonnes.” Irwin believes the US soybean sector will have “a certainly ugly end of year 2024 and beginning of 2025”.
This would result an average agricultural price of no more than USD 390 for the next yearwhich is below the USDA forecast of $411, based on its ending stocks estimate of 12.10 million tons.
Rich Nelson, chief strategist at Allendale Inc., agrees with Irwin that 2024/25 ending stocks will be higher than USDA forecasts, although it coincides with the processing volumes proposed by the organization. “Grinding estimates will increase in the coming months, not decrease,” Nelson said.
However, that will not be enough to offset the high carryover caused by poor US soybean exports, which would end up below the USDA data. Considering the excellent start to the campaign, Nelson aims for final stocks between 12.92 and 13.60 million tons. “Anything over 10.90 million tonnes implies less than $400 for November futures“, adventure.
Irwin is also concerned about soybean export demand, and believes the USDA is too optimistic for 2024/25. “But Nothing alarms me more than the prospect of Donald Trump winning the presidential election in November.. This could be followed almost immediately by another trade war with China. We could see an even steeper drop in exports, and that would take ending stocks above 14 million tonnes, a blow to prices.”.
In Brazil, the consulting firm TF Agroeconomica warns its clients that up to now there is no fundamental factor that can make the price of soybeans rise steadily in the short or medium term.. “What are you waiting for to sell the soybeans you have left? The intention of our producers increase production 2024/25 to 169 million tons It is the main factor that puts pressure on current and future prices. In fact, our recommendation is to take advantage of any current increases to lock in prices for the next soybean crop now, before they fall further. “Sell what you still have and what you plan to produce for the next harvest!”
Other analysts from the neighboring country agree on the idea of the immediate sale of part of the future production, along with a mechanism based on options, which allows participation in increases if they are generated.
The weather in the United States has the last word, especially during July and August. As always, there are doubts about his benevolence, but for now they are just projections. The only true thing up to this point is what we just described.
