Slumping soybean demand lowers costs

Soybean costs have been plummeting on China’s Dalian Commodity Exchange and that may be a dangerous omen, says a number one grains and oilseeds analyst.

“Something has happened to demand in China,” DTN’s lead analyst Todd Hultman informed attendees of a current webinar hosted by the corporate.

Back in September he informed a bunch of farmers in Nebraska that he was bullish on soybeans as a result of costs have been on the rise in China.

But they peaked across the time of his presentation and are actually under the 100-day common and on the lowest degree in 4 months. Soybean meal costs in China have additionally tumbled to a one-year low.

It might be because of the basic slowdown within the Chinese economic system, electrical outages hampering soybean crush or one other wave of African swine fever inflicting a discount in feed demand from the hog sector.

Whatever the explanation, the slumping demand is occurring at an inopportune time. Fall is the time of 12 months when U.S. exporters are sometimes “making hay,” stated Hultman.

“We’re just getting kind of crunched out of our opportunity this time,” he stated.

New crop shipments and gross sales commitments for U.S. soybeans are just below 1.2 billion bushels, which is 33 p.c under year-ago ranges.

That doesn’t bode properly, contemplating farmers simply harvested the second largest crop on file, estimated at 120.4 million tonnes.

“There is quite a bearish concern as far as the future of soybean demand in the year ahead,” he stated.

“We’re going to have to see a lot more activity perk up from somewhere.”

Arlan Suderman, chief commodities economist with StoneX, shares these considerations.

He stated China’s economic system is slowing resulting from strict COVID restrictions. Shanghai Disneyland lately shut down operations and well being employees examined all 34,000 guests to the park after one optimistic COVID case was reported.

People are scared to exit, inflicting a pointy discount in actions like journey and eating out. That in flip is resulting in a discount in pork consumption and consequently feed demand.

“We’re looking at a significant risk of soybean imports coming down,” stated Suderman.

The U.S. Department of Agriculture dropped its U.S. soybean export forecast to 2.05 billion bu. in its newest 2021-22 provide and demand estimates, down from 2.09 billion bu. in its October report.

“There’s going to be more reductions in the future because of the soft Chinese demand,” stated Suderman.

Hultman thinks exports will find yourself nearer to 1.8 billion bu., a 20 p.c drop from final 12 months.

That would push ending shares above 360 million bu., up from the USDA’s forecast of 340 million bu. and that wouldn’t be good for costs.

DTN’s money soybean index worth was US$11.46 per bu. as of Nov. 9, which is 36 cents decrease than one month in the past. He stated costs have been dropping “precipitously” and that pattern is more likely to proceed.

“It’s possible that we could be looking at $10 soybeans at the low end,” stated Hultman.

Prices are falling in different international locations as properly. U.S. soybeans had been cheaper than Brazilian beans in August, September and October however they’re now at parity for January cargo.

Brazil has the sting in transportation prices to China versus U.S. soybeans out of the Gulf of Mexico, in order that favours export enterprise from Brazil.

“That is one of the more discouraging things for soybean prices at the moment.”

Suderman stated there’s a risk that China will make a sizeable soybean buy as a goodwill gesture previous to the digital summit between U.S. president Joe Biden and Chinese chief Xi Jinping scheduled for subsequent week.

“Frankly, it needs to happen if we’re going to have any opportunity to hit USDA’s current (export) target,” he stated.

Contact sean.pratt@producer.com

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