Why Soybean Futures Are Gaining

Rejeana Gvillo

Oct 12, 2020

The soybean complex has been gaining strength, which is helping lift canola futures that were already in a supportive environment thanks to the tightening stocks situation. This week, we wanted to discuss some of the elements that are adding support to soybeans and the implications for canola futures.

U.S. supplies reduced

USDA’s September 1 stocks total shocked the market, implying that use during June-August was strong — thanks to strong exports and crush during that period. New-crop supplies have steadily been reduced as well on trims to yield throughout the season. USDA’s report on Friday further confirmed tightening supplies on lower acreage and production for the US as well as higher exports resulting in ending stocks being forecast at 290 million bushels.

Chinese demand recovering   

While the country is still dealing with African swine fever, the hog herd is recovering, which is resulting in increased demand for soybean meal versus this time last year. Plus, China boosted its other animal herds during the pandemic, and these herds also still need meal. While imports are around 97 million tonnes for 2019/20, we expect a larger volume for 2020/21. On top of that, some exporting countries also increased herd sizes to meet Chinese pork import demand, with feed demand for those herds strong as well. Crush margins for China are strong, which is also not discouraging imports of soybeans.

Brazil seeding off to shaky start, possibly oversold on old-crop

Brazil’s seeding season is here, and the top-two producing states need moisture. Both states are running behind normal seeding averages, with Parana notably behind. It is still a bit too early to get excited about yield losses, and producers there can make significant progress in a short time. But, what is being talked about is that the later the Brazilian crop, the longer other exporters have an opportunity to export in this marketing year. Plus, this further opens the window for corn exports with Brazil’s main corn crop following its soybean harvest. The weather forecast calls for some moisture in the near term, but the moisture situation remains less than ideal for now. Brazil also could have been too aggressive on selling its 2020 harvest. Brazil is importing larger volumes of soybeans earlier in the year versus recent history.

FBN's take on what this means for the farmer

Altogether, FBN looks for higher soybean prices in the coming weeks, which means that canola futures could be further supported. Additional selling opportunities are expected to be present in the coming weeks. With China coming off holiday this week and the fundamentals discussed above, we look for additional strength in the soybean futures market.

Want access to more insights like this?

This article is excerpted from our Market Intelligence newsletter, delivered weekly toFBN Market Advisory members in Canada. With FBN Market Advisory, you'll receive truly personalized tools and reports to support your grain marketing efforts. Get access to market news, straightforward marketing recommendations, basis trend insights and weather reports—all relevant to your operation and geographic location.

FBN Crop Marketing Canada, Inc. does not guarantee any specific benefits or value from participating in FBN Crop Marketing; results will vary. Past performance is not necessarily indicative of future results. FBN Crop Marketing Canada offerings involve risks, including the risk that market conditions deteriorate, resulting in contract participants receiving lower prices for their grain than had they not participated in the FBN offering. 

Copyright © 2015 - 2020 FBN Crop Marketing Canada, Inc. All rights reserved. The sprout logo, "Farmers Business Network," "FBN," and "Farmers First '' are registered service marks of Farmer's Business Network, Inc. and are used with permission. All other trademarks are the property of their respective owners. FBN Crop Marketing Services are offered by FBN Crop Marketing Canada, Inc. and are available only in provinces where Farmer's Business Network Canada, Inc. is licensed. FBN Crop Marketing Canada, Inc. Box 5607, High River, AB T1V 1M4, Canada

Rejeana Gvillo

Oct 12, 2020