Soybeans Inch Higher on U.S. Sales and Brazil Supply Fears
Chicago soybean futures saw a marginal increase on Wednesday, driven by robust U.S. export sales, rising crude oil prices, and concerns over production in Brazil, the world’s largest soybean exporter.
The most-active soybean contract on the Chicago Board of Trade (CBOT) rose by 0.2% to $13.15-1/2 a bushel. Similarly, CBOT corn saw a 0.1% increase, reaching $4.73-1/4 a bushel, while wheat remained unchanged at $6.23 a bushel.
Although soybeans experienced a 1.1% drop on Tuesday due to anticipated rainfall in key Brazilian cropping areas, analysts have been revising down their forecasts for Brazil’s harvest in recent weeks. A farm survey conducted on Tuesday revealed concerns that heatwaves and scarce rainfall in Mato Grosso, Brazil’s largest grain state, would lead to a significant drop in soybean production for the 2023/24 season.
Brazil’s exports, on the other hand, continue to thrive, surpassing 100 million tons this year. In fact, soybean shipments from Brazil are expected to reach 3.5 million tons in December, a substantial increase from December 2022’s figure of 1.52 million tons.
Furthermore, the recent confirmation by the United States Department of Agriculture (USDA) regarding the sale of 132,000 tons of U.S. soybeans to unknown destinations has contributed to the support of soybean prices. This sale is part of a series of export sales that have played a pivotal role in the market.
The rise in crude oil prices to nearly $80 a barrel has also impacted the soybean market positively. The increase in oil prices directly influences the ethanol market, as ethanol can be derived from soy. Consequently, higher crude oil prices exert upward pressure on soybean prices.
Commodity funds were net sellers of CBOT soybean and corn futures on Tuesday, while being net buyers of wheat futures.
In addition to the factors mentioned above, disruptions in trade routes due to attacks on shipping in the Red Sea and off the coast of Somalia have impacted global markets. As a response, the United States has initiated a multinational operation to safeguard commerce.
Egypt’s state grains buyer also bought 480,000 metric tons of Russian wheat in an international tender, illustrating the abundant supply of wheat from Russia. Cheap Russian shipments had previously led to a three-year low in the CBOT wheat market in September at $5.40.
Ukraine’s Deputy Prime Minister reported that 10 million metric tons of products have been exported to 24 countries via its alternative Black Sea corridor.
Earlier, the Bank of Japan’s decision to keep interest rates steady led to a rise in the U.S. dollar against the yen. Meanwhile, MSCI’s global stock index experienced positive gains as investors focused on the potential for U.S. interest rate cuts in 2024.
Chicago soybeans, which began the year above $15 a bushel, faced a decline but have since rebounded from a two-year low of $12.51 in October.
In conclusion, Chicago soybean futures saw a modest increase due to U.S. export sales, rising crude oil prices, and concerns over soybean production in Brazil. Despite forecasts for a decline in Brazil’s harvest, the country’s exports remain strong, contributing to the overall market dynamics. The recent U.S. soybean sales and disruptions in global trade routes have further influenced market trends. As the soybean market continues to evolve, traders closely monitor various factors to determine future market movements.
[Word Count: 600]
