Soybean Prices Stay Aloft on China's Strong Demand

August 9, 2016 05:00 AM
 
Soybeans

China’s unrelenting demand for the massive supply of U.S. soybeans is expected to keep prices in the $9 to $10.75 range and shippers scrambling to move orders by the end of the marketing year, according to analysts.

In mid-day trading Monday, soybean prices for September contracts rose 8.5 cents to $9.965, while November soybean contracts were up 6.75 cents at $9.8125.

“(We’ve had) sales eight days in a row of value buying” (mainly by China), said Don Roose of U.S. Commodities.  “China has realized it can buy at a price that makes sense,” he observed.  “As the price gets over $10, demand will slow down,” Roose said. “Under $9.60, demand will pick up.”

Speculative funds are also having an impact on soybean prices, explained Chip Nellinger, an analyst with Blue Reef AgriMarketing in Morton, Ill. Speculators bet huge positions up to $12, but with less threatening weather and ample rainfall, they took their profits, he said.

However, thanks to weather woes that caused a shortfall in South America’s expected crop, the U.S. is currently the world’s only supplier. That has at times pushed export sales to five times the usual amount of  2 million to 5 million bushels,  commented Jerry Gulke , president of the Gulke Group in Chicago.

“We’re the only game in town, and we’re going to be for the next five months,” Roose observed.

For producers, Roose cautioned, it’s really a balancing act. “The soybean market is inverted,” he pointed out. “The front months are stronger than the back months.”

With China’s own big stockpile, soybean prices also are unlikely to go above $10.50 or $10.75, analysts said.

“If  U.S. prices go above $10.75, I think China will have better luck selling governmentally held soybean reserves,” observed DuWayne Bosse of Bolt Marketing in Britton, S.D.

While that would ease demand for U.S. soybeans, it would not stop it completely, because even if China sells more reserves, fresh imported beans still will be needed to blend with lower-quality stockpiles. “Demand for U.S. soybeans will not go away until the new South American crop comes online in late February,” Bosse said.

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