Soybeans Approach Bull Market as Floods Damage Argentina's Crop

April 22, 2016 07:00 AM

Soybean futures are poised to enter a bull market after floods damaged crops in parts of Argentina, the world’s third-biggest producer.

Argentina, the top exporter of soybean meal and vegetable oil, got as much as six times the normal amount of rain this month, flooding flat fields that the Santa Fe province’s governor said will result in a crop “failure.” Adverse weather will reduce output by more than 8 percent, officials at provincial exchanges said. Buyers may turn to the U.S., the largest grower, for supplies as the dollar’s slump against the peso makes shipments more attractive.

Optimism for demand is dominating the market after China, the top buyer, reported that soybean imports in March jumped 36 percent to 6.1 million metric tons from February. That marked the highest ever for the month. American farmers are benefiting as the dollar’s drop against the real in Brazil, the largest exporter, made U.S. supplies more competitive. In the past six weeks, sales from the U.S. exceeded the average in the previous five years, and the total in the week ended April 14 was the highest for the period since 2009, government data show.

“The exports are improving and may be a sign of business shifting over from South America,” Roy Huckabay, an executive vice president at Linn & Associates LLC in Chicago, said in a telephone interview. “There’s been a flow of investment money into soybeans and other commodities because of the low interest rates around the world.”

Bull Market

Soybean futures for July delivery rose 0.9 percent to $10.28 a bushel at 12:26 p.m. on the Chicago Board of Trade. Earlier, the price reached $10.4375, the highest for a most-active contracts since July 14. A close of at least $10.265 would mark a 20 percent gain from the settlement of $8.5525 on Nov. 13, the cheapest since March 2009.

On Wednesday, aggregate trading jumped 31 percent to a record 804,244 contracts from the previous all-time high on Tuesday. Open interest, or the number of outstanding contracts held, rose to a record 895,583 contracts on Tuesday.

Investors are betting the most since June 2014 that the transition to La Nina weather conditions will raise summer temperatures and lead to drier conditions when U.S. crops are setting pods and filling them with beans in August.

Brazil is the top soybean exporter, followed by the U.S.

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Spell Check

Charlie Tuna
Terre Haute, IN
4/22/2016 09:34 AM

  @Bossman - I think you mis-read the article. It stated in past 6 weeks. So we saw best in that 6 week period not all year. And be careful with thinking there is a huge loss in S. America, as we (U.S.) thought the same thing last summer and ended up with bumper bean crop. This rally is pure spec rally. When the spec stops defending their positions, cards will fall 8 times faster than it rose. No real fundamental substance supporting the rally.

Little city, MN
4/22/2016 07:39 AM

  So export sales have exceeded the five year average? Pretty sure I don't remember hearing that ever, all I ever heard was exports were ok not great. Nobody ever said we were on pace to the highest level since '09. Kinda think the traders and analysts were downplaying the flooding that they all said they knew about for 6 weeks.

Pierre, SD
4/21/2016 03:18 PM

  Fellow farmers. Don't get too greedy now, and don't bet the whole farm. Maybe only go half in??!!


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