China demand and global supply concerns drive U.S. soybean price higher

January 20, 2021 - Soybean prices continued to rise in December after falling back from late November highs, according to a report published by the USDA.

Cash prices pushed past $13.00/bu in early January following futures prices in Chicago that rose above $13.50/bu. Central Illinois cash prices have added $1.00/bu since mid-December, propelled by short-term uncertainty for soybean and product shipments out of Argentina as well as tightening supplies in the United States and concerns regarding yields in South America.

Since mid-August, U.S. cash soybean prices are up 50 percent on both strong China demand (rebounding pork feeding) and tightening U.S. supplies (smaller-than-anticipated production over the past 2 harvests).

The situation in Argentina centers on labor issues impacting cargo loading at port. December port loading data showed no soybean shipments while loadings of soybean meal were down two-thirds and oil down three-quarters from the average December loadings observed in 2018 and 2019. While port loading data is no substitute for official trade statistics, it suggests significant reductions in soybean and product exports for the month.

Dry weather conditions in South America have also supported higher prices. Soybeans in Brazil remain tight with increased imports supplementing limited domestic supplies in late 2020. Recent rains have alleviated some of the concerns, though total rainfall to date remains below historic trends reducing subsurface moisture levels in many growing regions. Regardless, Brazil production is still forecast record large in 2021.

With futures prices closing near $13.75/bu on January 11, they remain well above prices observed in mid-December. With a lower U.S. 2020 soybean harvest estimate this month and reduced U.S. carryout forecast for 2020/21, support for current price levels is expected to remain strong. Expectations are that prices may decline once the Brazil harvest begins in earnest in the coming weeks. While this will alleviate any short-term supply issues, supply and demand factors still point to prices remaining well above the depressed levels observed prior to August 2020.