Power Hour: 3 Factors Driving the Soybean Market

March 26, 2014 07:00 AM
Power Hour: 3 Factors Driving the Soybean Market

Farm Direction’s Kevin Van Trump provides his take on the soybean market

Soybeans have been the standout in 2014. Since January, old-crop soybean prices have increased at a steady and impressive rate.

Take a look at the May 2014 Soybean chart:

May 2014 Soybeans

Kevin Van Trump, president of Farm Direction, says three main factors are driving the soybean market right now. They are:

  • Chinese demand
  • South America production
  • Extremely tight U.S. supplies

Van Trump discussed these issues with Chip Flory on Monday’s Market Rally radio show. (Their discussion starts at 13 minutes into the show).

China’s cancellation of orders for soybean prices is grabbing headlines, Van Trump says. "From what we’ve been hearing, it sounds like China over purchased beans," he says.

Despite these recent setbacks, Van Trump say, China’s total commitments for U.S. soybeans are still around 25% higher than last year. "This number is simply huge and has been extremely hard for the market to fully digest," he says.

With such strong demand from China, the trade becomes more fearful of an even tighter USDA balance sheet. "The bears argue this increase in exports is going to be offset by a much higher increase in imports (60-80 million)," Van Trump Says. "We are already starting to see this as Brazilian beans will soon start hitting U.S. shores (April-May deliveries)."

As for South American production, Van Trump says he’s hearing about falling basis levels in South America. "There questions regarding South American production and logistics," he says.

All of these issues will be top-of-mind on Monday, March 31, when USDA releases its Planting Intentions and quarterly Grain Stocks reports. "The trade is clearly preparing for next Monday's onslaught of USDA numbers," Van Trump says. "There’s talk that USDA could drastically increase new-crop soybean acres, so we might start to see some of the bulls squaring up a few positions."

For More Information
Read Van Trump’s blog: Current Marketing Thoughts

Listen to more Market Rally, hosted by Chip Flory 

Read and watch more Top Producer Power Hour news and videos.

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