Soybeans’ Rally Runs Out of Steam

March 9th, 2015

By:

Category: Grains, Oilseeds

Soybean-Oil-Basis(Wall Street Journal) – The rally in soybeans ended as suddenly as it began.

A work stoppage by truckers in Brazil blocked soybean deliveries to ports and helped send prices to a seven-week high of $10.37¼ a bushel last Monday. By Friday, many of the truckers had returned to work and prices had fallen 5% as investors refocused on slowing demand for U.S. supplies and the advancing harvest in South America.

Soybeans are again flowing from inland farms to coastal ports in Brazil, the second-largest exporter of the oilseed after the U.S., supplying shippers with crops to load onto cargoes bound overseas.

“Trucks full of soybeans are now hogging the roads to the ports,” said Rich Nelson, director of research at commodities advisory firm Allendale Inc. in McHenry, Ill.

Soybeans for March delivery at the Chicago Board of Trade ended Friday at $9.79¼ a bushel, the lowest price since Feb. 11.

The resumed Brazilian deliveries come amid a slump in demand for U.S. soybeans. Weekly data from the U.S. Department of Agriculture showed 23.3 million bushels of soybeans had been inspected for export in the week ended Feb. 26, down 35% from the week before, to the lowest level since last September, analysts said.

“We’re seeing a definite waning in U.S. export shipments,” said Anne Frick, senior oilseed analyst for brokerage Jefferies LLC in New York. Though foreign demand for U.S. soybeans has been robust, global importers such as China typically shift their purchases to South America as harvest there picks up pace and crops come online.

However, last week China lowered its economic growth forecast to about 7% for 2015, suggesting a bleaker outlook for demand from the world’s largest buyer of the oilseeds, analysts said.

A plunging Brazilian currency has also pressured soybean prices, providing Brazilian farmers with an incentive to sell crops overseas in competition with the U.S. The dollar last week rose 7.7% against the real, which fell to its lowest level in more than a decade, increasing profits for farmers as they converted their dollar-priced commodities such as soybeans into the local currency.

“Soybeans have been crashing pretty hard,” said David Durra, principal of AgSpread Analytics Inc., a commodity-trading firm in Chicago. For now, Brazilian farmers are selling crops because they “receive more reais for each bushel of beans,” he said.

Prices for the oilseeds could see a bounce this week; In a closely watched crop report, the USDA is expected to clip estimates for domestic soybean stockpiles, pegging inventories at the end of the 2014-15 season on Aug. 31 at 379 million bushels, down from its February estimate of 385 million, according to analysts surveyed by The Wall Street Journal.

Still, analysts think any upswing in prices will be short-lived, barring future supply disruptions in South America, since soybean reserves still would be more than four times as large as last year.

“The rally in February may have cannibalized the market,” Ms. Frick said. “It’s possible we have the spring high in place.”

 

Add New Comment

Forgot password? or Register

You are commenting as a guest.