Soybean futures are flirting with $12 to kick off the trading week, driven by a myriad of factors, including US export commitments hitting a multi-year high and institutional investors raising their long bets. But this is part of the broader boom in the commodities market, particularly in the agriculture sector, caused by strengthening fundamentals and a weaker US dollar.
January soybean futures rose $0.12, or 1.02%, to $11.93 per bushel at 17:24 GMT on Monday on the Chicago Board of Trade (CBoT). Soybean prices are coming off a weekly surge of more than 3%, adding to their 2020 rally of 25%.
The 2020-2021 marketing season started just 11 weeks ago, and total US soybean export commitments stand at 51.3 million tons, representing more than 85% of the US Department of Agriculture’s (USDA) full-year forecast. This is also the highest percentage achieve this early in the marketing year.
So, who is buying? Fifty-five percent of front-month soybean futures on the CBoT are destined for China, and another 20% are earmarked for “unknown,” which industry observers say is usually China. Also, experts note that the USDA underestimated the global demand for US soybeans, which could be good news for prices amid dwindling domestic stocks.
With South American crops taking a hit due to dry conditions, could the global soybean market slide into a deficit? It might be too early to predict right now, but importers may scoop up vast quantities due to a weakening US dollar and Latin American currencies.
Perhaps to better understand the medium- to long-term future, it might be prudent to see where hedge funds and index traders are placing their money. According to Reuters, speculators have been adding to their long bullish bets on both corn and soybeans, betting on tightening conditions.
The newswire cited the latest US Commodity Futures Trading Commission (CFTC) data, highlighting that soybean net long positions and contracts came in at 208,774, down from a net long of 221,094 contracts a week ago. Although this the figure slumped from last week, it is still at the highest level in seven years.
Soybeans and other commodities are benefiting from a weaker greenback. The US Dollar Index, which measures the greenback against a basket of currencies, rose 0.13% to 92.51, from an opening of 92.37. But the index is still down more than 4% year-to-date. A lower buck is good for dollar-denominated commodities because it makes it cheaper for foreign investors to buy.
In other crops, January corn futures added $0.0425, or 0.99%, to $4.325 per pound. January wheat futures picked up $0.05, or 0.83%, to $6.045 a bushel. February coffee futures shed $0.008, or 0.68%, to $1.1625 per pound.