Soybean futures on the Chicago Board of Trade (CBOT) surged to a 2-1/2-month high on Wednesday, driven by mounting concerns over potential supply shortages from the world‘s largest producer, Brazil. Concerns were driven largely by adverse weather conditions, including drought in northern and central Brazil and excessive rainfall in southern areas, which are threatening soybean and corn production in the country.
The 11% surge in U.S. soybean futures prices over the past five weeks was also attributed to increased demand from domestic crushers and buyers in China. However, Ole Houe, the director of advisory services at Australian agricultural brokerage IKON Commodities, expressed cautious optimism, suggesting that the gains in soybean futures may not be sustainable in the long run, particularly if Brazilian and Argentine output combined would still be higher than last year, even with potential production losses due to bad weather.
As of 20:34 Beijing time, the CBOT soybean continuous contract rose to 1,394.8 cents per bushel, a 0.36% increase, while wheat futures inched higher and corn futures inched lower. Consulting firm AgRural recently lowered its forecast for Brazil’s 2023/24 soybean production, potentially leading to further reductions in the coming weeks.
The surge in soybean prices also impacted soymeal futures, which rose to contract highs, fueling increased demand for U.S. soymeal, especially with low production in drought-hit exporter Argentina. In the corn market, France raised its official forecast for this year’s corn harvest due to favorable summer rains, while the recent drop in U.S. winter wheat ratings did not significantly impact wheat prices.
In addition to supply concerns from Brazil, other factors contributing to the surge in soybean futures included a weaker U.S. dollar, which makes U.S. agricultural products more competitive for buyers with other currencies, as well as increased orders from China, with analysts noting a significant spike in Chinese purchases of U.S. soybeans.
While soybeans face technical resistance at the 200-day moving average, speculators have been taking long positions in soybean and soymeal futures, pushing prices higher and contributing to the recent surge in futures prices. As the market continues to navigate the impacts of adverse weather and increased demand, the soybean futures market is poised for continued volatility in the coming weeks.