Soybeans Extend Rally to Four-Month High on ‘Fierce’ Demand

(Bloomberg) – Soybean futures extended a rally to a four-month high in Chicago as U.S. exports climbed and demand increased for fuel made from the oilseed. Soybean oil for January climbed to a record.

Last week, soybeans jumped 5.3 percent, the most for the January contract since June, and soybean oil surged 7.7 percent, the biggest gain since Dec. 2015. On Nov. 23, the U.S. Environmental Protection Agency boosted 2017 biofuel quotas to a record, while data from the Department of Agriculture showed better-than-expected export sales of the oilseed.

“It’s all about the aftermath of the EPA increases when the soy oil went through the roof last week,” Stefan Vogel, head of agricultural commodities research at Rabobank International in London, said in a telephone interview. “It’s still a follow-up trade.”

Soybean futures for January delivery rose 1 percent to close at $10.56 a bushel on the Chicago Board of Trade. Earlier, the contract reached $10.65, the highest since July 18. The commodity climbed for the seventh straight session, the longest rally since June 10.

Soybean-oil futures for January delivery climbed 0.1 percent to 36.97 cents a pound after reaching 37.63 cents, a record for the contract that debuted in December 2014. Aggregate trading doubled compared with the 100-day average, according to data compiled by Bloomberg, and soybeans were up 67 percent.

Under EPA quotas, refiners must mix 19.28 billion gallons of renewable fuel into the gasoline and diesel supply next year, up from 18.8 billion gallons proposed in May. Advanced biofuel, including biodiesel made from vegetable oil, will rise to 4.28 billion gallons from 4 billion signaled earlier this year.

The U.S. is the world’s top producer of soybeans. In the first 12 weeks of the marketing year, export-sales commitments have climbed 26% to a record as of Nov. 17 from a year earlier, according to the USDA data. Soybean-meal prices in Dalian are up 34 percent this year on rising pork production in China, the top importer and consumer of the oilseed.

“Soybean-export demand is still very good from China,” Mark Schultz, the chief analyst at Northstar Commodity Investment Co. in Minneapolis, said in a telephone interview. “Speculative buying continues to flow into soybeans based on the new EPA biofuel targets.”

China’s import demand probably will reach a record of at least 87.5 million tons in the 2016-17 season, JPMorgan Chase & Co. said in a report last week. Global consumption will probably expand 6 percent in the same period, the strongest rate for the major grains and oilseeds, the bank said.

“World soybean consumption growth remains fierce, fueled by ongoing strength in animal protein demand,” JPMorgan said.

Soybean-meal futures for January delivery rose 1.6 percent to $328.20 per 2,000 pounds. The price has jumped 24 percent this year. In 2017, soybeans have gained 22 percent and soybean oil advanced 20 percent.