US Soybean Prices Crash to 5-Month Low

GMO Dusan Kostic/Adobe Stock

Spend Matters welcomes this guest post from Jonathan Stokes, an analyst at Mintec.

In recent months, soybean prices have crashed to a five-month low. Previously, prices were edging upward and the sales outlook for American producers had been positive. So why was there this quick reversal in fortune?

In late 2016, U.S. soybean prices climbed quickly in reaction to concerns over adverse weather conditions in South America. Estimates stated that nearly 60% of Argentina’s major growing regions had received more than 25 cm of rainfall in the space of 30 days. Flooding struck fears of limited crops in the market place and speculation was heighted as simultaneously Brazilian soybean producers issued drought warnings. This supply uncertainty unsurprisingly forced prices to increase.

Fast-forwarding to 2017, the South American soybean crop concerns evaporated as Brazilian production climbed 14% year-over-year to an estimated 108.5 million tons in the 2016/17 season. Preliminary reports state that in the 2017/18 season, U.S. soybean acreage is likely to climb 7% y-o-y to a record 89.5 million acres. The increase in soybean acres is anticipated to put further downward pressure on soybean prices.

The problems of oversupply in the U.S. soybean market are unlikely to stop with the 2016/17 season but look likely to continue into the upcoming 2017/18 season, too. With such low pricing compared with other vegetable oils, however, its attractiveness to buyers should be increasing.

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