Since week 35, the soybean quote on the CBoT in Chicago has risen particularly sharply. At the peak in week 38, the highest quotation since 2014 was even set. Where does the extremely high soy price come from? And can this price stand?
The soybean market is largely determined by the United States, Brazil and China. The United States and Brazil together have a share of almost 85% in the export market. This, in combination with the always strong demand from the Chinese animal feed industry, creates a so-called 'soybean triangle'. The situation in these countries therefore determines market sentiment every season.
African swine fever in China
One of the main reasons for the explosive price increase is the particularly strong demand from China. The growth potential of the Chinese pig herd in the coming years is immense, given that the outbreaks of African swine fever have severely depleted the pig herd. China states that it will shortly approve a vaccine or drug against the virus, after which an increase in the number of pigs is obvious. One condition is therefore that China gets the outbreaks of African swine fever under control.
Brazilian soy growers are not waiting for this certainty, but want to benefit already. That is why they have significantly expanded the soybean acreage in recent years. The country is now the largest soy-producing country in the world and that results in a record harvest. Figures from Statista show that there is no stop to this area expansion for the time being. The statistics service expects a yield of more than 2028 million tons for the 140 season. For the 2021 season, the proceeds are about 113 million tons.
The fact that Brazil is focusing more on soy cultivation has not gone unnoticed in the Netherlands either. The country has surpassed the United States this season as largest soybean exporter towards the Netherlands. In the first half of this year, the Netherlands imported more than 1,6 billion kilos of soybeans from Brazil, which is about 1 billion kilos more than was imported from the United States. Brazil has another advantage. The gigantic harvest ensures that the price for Brazilian soybeans is relatively low, although the United States now has the same advantage. The price of US soybeans is expected to fall in the coming period as a result of a weaker dollar.
Quotation far above long-term average
Because the demand for soybeans has exploded in the past period (partly due to the extra demand from China), the listing on the CBoT in Chicago has risen to extreme heights in 4 weeks. On Friday, September 18, the listing closed at $10,44 per bushel, which is over $1 per bushel above the 5-year average. The listing was therefore also at the highest level since 2014. Compared to last season, there is even a difference of $1,50 per bushel.
Although the quote has now fallen to $9,89 per bushel, it is still $0,54 above the 5-year average and last year's quote. However, strong demand from China does not seem to be able to keep up with production growth in Brazil. For next season, the International Grains Council expects global soybean stocks to be 10% higher to a total of 52,2 million tons. Global demand, on the other hand, is expected to grow 'only' by 4%. In short: the oversupply continues to dominate the market, making it difficult to maintain this extremely high quote.