Why Did Soybean Prices Fall in October?
Soybean’s stock-to-use ratio, which tells us where the supply-demand dynamics stand, is key to how the commodity’s prices move. We’ll discuss how recent soybean prices trended in October. We’ll compare the prices with previous years.
By looking at these trends, we can get some insight into seed companies’ fundamentals such as Monsanto (MON) and Syngenta (SYT).
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It can also help us understand fertilizer companies’ fundamentals such as PotashCorp (POT) and CF Industries (CF) as well as a broader portfolio of ETFs such as the VanEck Vectors Agribusiness ETF (MXI).
In October, soybean prices continue to trend lower after reaching a high of $11.80 per bushel in June 2016. On October 12, 2016, soybean prices stood at $9.5 per bushel—compared to $9.8 per bushel on the same day in September.
The fall in soybean prices in October comes on the back of an increase in the global inventory, as we discussed in the previous part of this series. However, soybean prices are flat compared to the same day in October 2015.
Soybean and corn prices are still low compared to the past five-year average. It’s also why the farm income has been falling over the years. In the near term, an environment of low crop prices won’t generate excitement in the seed and fertilizer sectors.
Next, we’ll discuss the stock-to-use for wheat and its price trends.