Soybeans Spike on Chinese Demand, Record Huge Monthly Gain

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Soybean futures are rallying on Tuesday as the agricultural commodity will post its first monthly gain since February. Although soybean prices are down this year, they have stabilized over the last three months. With strong Chinese demand and Brazil already completing most of its harvest, is there room for additional growth?

August soybean futures soared $0.2125, or 2.47%, to $8.8275 per bushel at 18:17 GMT on Tuesday on the Chicago Board of Trade (CBoT). Soybean will post a 3.75% increase in June, but it will be down in the second quarter. Year-to-date, the crop has slumped nearly 8%.

The biggest factor for soybean’s sudden rise is strengthening Chinese demand. According to various reports, Soybean has been rebuilding its inventories to satisfy ballooning demand nationwide. This is positive for the US agricultural product since soybean remains critical in the US-China phase one trade agreement that was signed in January.

New customs data found that the Tianjin port in northern China processed 2.72 million tons of soybean imports from January to May. This is up at an annualized rate of 62%. The main source of imports was from the US and Brazil, accounting for more than 90% of the port’s total. Officials say that the imported soybeans will be primarily used for oil processing and feed processing as domestic pig production and marketing have normalized.

Does this mean China is adhering to the provisions inside the phase one trade deal? Not quite, says S&P Global Platts. The group forecast that Beijing is projected to purchase large volumes of US soybeans in the fourth quarter, but these late-stage purchases will fall short of the first phase targets. Why the October-to-December period? Chinese crushers typically demand on American soybeans in Q4 when the harvest starts in September.

The US Department of Agriculture (USDA) recently reported that 71% of the American soybean crop was in good-to-excellent condition, up from 70% in the previous week. But soybean markets will get more details in the USDA’s next quarterly report.

In other agricultural commodities, August corn futures soared $0.125, or 3.8%, to $3.41 per pound. August wheat futures jumped $0.05, or 1.03%, to $4.915 a bushel. September coffee futures edged up $0.0015, or 0.15%, to $1.0115 per pound.

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