*The investor long is likely to be close to historical highs
*US soybean sales to China in each of the last 12 business days
Soybean has become bullish in the past four weeks as Chinese demand and lower US yield prospects under adverse weather combine to dramatically tighten US soybean end stocks. China was forecast to import 28 million metric tons of US soybeans, but that estimate appears low if China maintains its purchase pace of booking 1.5 million ton a week.
The soybean rally is perhaps entering its late phase. The investor long is likely to be close to historical highs, suggesting waning buying appetite going forward. Soybean November contract on the Chicago Board Of Trade their highest level since May 2018 at $10.46 a bushel (27.218 kg) on Monday. November soybean contract has jumped more than $1.36 a bushel or more than 16% since the start of August.
The US Department of Agriculture confirmed US soybean sales to China in each of the last 12 business days. A swift soybean harvest is expected to pressure US soybean futures price in coming days, which has been trading at multi-year high recently on strong China demand. Typically, US soybean harvest starts in early September and rains can delay the process.
The USDA has forecast the country’s soybean yield at 51.9 bushel/acre, up 9% on the year, and output at 117.38 million ton in 2020-21, up 22% year on year. According to the USDA, American exporters sold nearly 2.7 million ton of US soybeans in the first half of this month alone for delivery to China.
China is the world's largest soybean importer. November futures have risen over $0.355/bu week on week – the first time since the beginning of US-China trade dispute that prices have traded higher than $10/bushel, an agricultural analyst said Sept. 18.
Speculators have likely placed record bullish bets for the time of year on Chicago-traded soybeans amid the historic rally in futures, and those bets may be within striking distance of the all-time high set more than eight years ago. Trade sources place the Wednesday-Friday fund buying in soybean futures at 50,500 contracts. That would rank the net long at Friday’s close behind just seven weeks in mid-2012 and less than 12,000 contracts from the all-time high of 253,889 set in the week ended May 1, 2012.
(Disclaimer: This analysis is only for educational purpose and is not and must not be construed as investment advice. It is analysis based purely on economic theory and empirical evidence. Readers are requested to kindly consider their own view first, before taking any position.) Date: 22-9-2020