Soybean futures surge amid political shifts and Biden’s campaign exit
Expana Soybean futures experienced a significant uptick on Monday, buoyed by a surge in short covering. The CBOT November soybean futures contract had its largest single-day gain since July 2023. This rebound comes after recent lows not seen since 2020, following the announcement that President Joe Biden has ended his re-election campaign. According to market players, the market’s recovery is attributed to shifting political dynamics.
Market players say that the recent decline in soybean futures was partly driven by speculation that former President Donald Trump might be re-elected and impose new tariffs on China, a leading global buyer of U.S. soybeans. Such a trade dispute could potentially dampen U.S. soybean exports and pressure domestic prices, especially given the current high global inventory.
However, the political landscape took a turn on Monday, with soybean prices rising as investors reassessed Trump’s chances in the upcoming election. This shift was influenced by Vice President Kamala Harris receiving substantial political backing and raising nearly $50 million in under a day following Biden’s campaign withdrawal. Analysts anticipate that Harris will continue Biden’s foreign policy strategies, including those related to China and Ukraine. The CBOT August soybeans futures contract settled up +20-1/2 ¢/bu at $11.17-3/4 per bushel. The new-crop CBOT November soybeans futures contract settled up +32-3/4 ¢/bu at $10.68-3/4 per bushel.
Brazilian soybean oil prices surge amid robust demand from the biodiesel sector
The Expana Benchmark Prices (EBP) for Soybean Oil FOB Brazil climbed by 5.2% week-on-week to $1019.5/mt on 17th July; reaching its highest level since November 2024. Market players attribute the increase in both prices and export premiums to strong demand from the domestic biodiesel industry, as players are reportedly seeking to fulfill the July and August contracts.
On 1st March 2024, the Brazilian government increased its biodiesel mandate from B12 to B14, raising concerns about a reduction in exportable supply. Market players have reported to Expana a year-on-year (y-o-y) decline in Brazilian soybean oil exports on the back of higher domestic demand. In H1 2024, 648,414 tonnes of soybean oil were exported from Brazil: a 56% y-o-y decrease. Domestic demand is expected to remain strong in the coming months, according to market sources. This has been compounded by reports of farmers in Mato Grosso having sold 85% of the 2023/24 crop, resulting in lower bean availability for crushers.
China’s demand direction will remain a watch point for prices. The top soybean importer purchased 9.72 million metric tonnes of soybean from Brazil in June, up by 2.2% y-o-y according to China’s General Administration of Customs. On the other hand, while US-origin bean imports also increased in the year, they accounted for only 12% of the total soybean imports to China in June. The surge in buying activity over the past weeks has resulted in an oversupply of beans in China. Market players opine that this is likely to limit imports ofbeans in the September-December period – peak marketing season for US bean purchases. Political developments in the US will be a watch-out factor for developments in the market amidst uncertainties about a US-China trade war. Expana will continue to provide updates as the situation unfolds.
MARS report cements rapeseed production concerns
The Monitoring Agricultural Resources (MARS) July report pegged rapeseed yields at 3.10 tonnes per hectare a decline from the June report of circa 2%. Importantly this decline in yield places the crop according to the MARS report below significantly the 5-year yield average of 3.17 tonnes per hectare. MARS cited the reason for the decline in potential yields as weather issues during the growing season in key nations such as France where excessively wet weather has been observed. Moreover, the wet weather has continued to cause havoc causing delays as the EU harvest enters full swing which could place further downward pressure on yields if farmers are unable to get the crop into storage quickly.
Market players submitted estimates to Expana for EU-27 rapeseed production to reach around 17.7 million metric tonnes in the 2024/25 season which if realized would be a substantial decline from the circa 19.7 million metric tonnes which were produced in the 2023/24 campaign. Industry insiders commented to Expana that if the poor weather continues and yields across the nations harvesting thus far do not increase the crop could even be as low as 17.5 million metric tonnes. It should be noted that more of the crop needs to be seen to ascertain if the lower end of these estimates is correct. Moreover, for further context, European and United Kingdom rapeseed production combined looks set to slip to levels of circa 18.6 million metric tonnes less than the EU alone produced in the 2023/24 season. Stocks-to-use are also looking exceedingly tight with the ratio currently sitting at circa 7%, the lowest in three seasons. This could mean that these limited stocks-to-use, along with production deficits, may add upward price pressure for rapeseed and therefore rapeseed oil longer term, as the market grapples with these shortfalls, according to market players.
Turning to key EU-27 import partner Ukraine Expana has received yield estimates of 2.35 tonnes per hectare this is a significant increase from two weeks prior estimates which pegged yield at 1.53 tonnes per hectare. If these yield improvements continue as more of the crop is harvested it could lead to production for Ukraine of circa 3.5-3.8 million metric tonnes in the 2024/25 season which even with these potential improvements in yield would place the crop at circa 1 million metric tonnes less than last season. The final numbers for Ukraine are likely to be exceedingly important as Ukraine along with other nations are likely to be key import partners for the EU to fill their looming supply shortage.
Expana has learnt that the Canadian crop continues to look large with market players submitting estimates for the 2024/25 season at 20 million metric tonnes plus if this does turn out to be correct it would be an increase of around 1 million metric tonnes compared to the prior season. However, it is important to note that carry into the new season is expected to be unusually large with industry insiders commenting that it could be anywhere from 2.7-3.3 million metric tonnes as compared to around 1-1.6 million metric tonnes in the prior campaign. This could give Canada a total supply volume for the 2024/25 season of upwards of 23 million metric tonnes compared to circa 20.5 million metric tonnes in 2023/24, if this is indeed the case it could cause canola prices to remain under pressure from this large and looming supply.
Furthermore, European players could be incentivized to seek Canadian supply as prices may be cheaper than those on the domestic market Expana has received information that there is the possibility of Canadian supply entering the EU at the time of writing with a spread of $54 between Canadian and European Futures. The potential increase in Ukrainian production combined with the available arbitrage between Canada and the EU could mean that the EU’s production shortfall is potentially not as impactful as was first thought according to market players.
China vitamin D3 offer prices surge 471% from June
China vitamin D3 prices have been firming up this week following supplier Tianxin’s new offer prices. Tianxin started offering CNY 320/kg in the Chinese domestic market and at $40.00/kg in the export market on July 22nd . Some other producers began offering at a level of $38.00-40.00/kg FOB China and CNY 320/kg, following Tianxin’s new offer prices on Monday. Market transaction prices also increased further to offer rising prices, with producers reporting more inquiries from customers this week. Offer prices had increased by 471%, from $7.00/kg in June to the current $40.00/kg.
Producers had long endured below-cost price levels, and some traders reported that producers were unwilling to deliver on previously signed “low-priced” contracts. Additionally, one trader mentioned a potential shortage of vitamin D3 intermediates, as a single producer supplies a large portion of the intermediates needed for vitamin D3 production. A trader described the market as “crazy,” adding that it had not heard any confirmed transactions at $38.00-40.00/kg. It noted that inquiries had increased, but the number of concluded transactions had not increased so far. The same source said transaction prices could eventually reach the offer prices if producers keep offering at that level, but it would still take some time as lower-priced stocks might still be available in the market.
A producer said that it was offering at $38.00/kg, adding that there were more inquiries, but it’s hard to conclude transactions at that level as buyers take time to react to high prices. A second trader indicated prices at $25.00/kg. A third trader said that it had sold some small-volume materials at $26.00-30.00/kg. A second producer said that it was offering at $38.00/kg, and there were very few transactions, though inquiries were high in both domestic and overseas markets. The same source said that it had a very low stock level while supply was short.
A trader said that the Chinese domestic market was reacting much quicker than overseas, with market transaction prices increasing from CNY 190/kg to CNY 220-230/kg within two days. A source said that there were transactions at CNY 220/kg and described the market as in “chaos.” It said that buyers would like to purchase spot material, but there was very little available in the market. In theory, supply should not be tight with the current production pattern, it added. Two other traders mentioned that there were transactions at CNY 240-260/kg but with very small volumes.
Henan Kanglong Industrial inaugurates new feed processing plant
Henan Kanglong Industrial Group Co., Ltd. has inaugurated a new feed processing plant at its existing production base in Henan, Central China. The plant will process 100,000 tonnes/year of animal feed, using raw materials such as corn, soybean meal, and molasses. This is a provincial-level project supported by the Henan Provincial Department of Agriculture and Rural Affairs and the Henan Provincial Department of Finance. The total investment amounts to CNY 50.6 million (approximately USD 7 million) and is expected to generate CNY 400 million (approximately USD 43 million) in annual revenue. “The plant will create over 30 jobs and provide a complete feed for small and medium-sized farmers across the county,” said the company.
Established in 1998, Henan Kanglong Industrial Group Co., Ltd. (formerly known as Henan Kanglong Industrial Group Co., Ltd.) is a Chinese company primarily operating in the animal husbandry sector.
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Written by Nick Wood
