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Soybean Exports to China: Hope versus Despair

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Soybean prices increase

On September 24, 2015, November Soybean Futures contracts trading on the CBOT (Chicago Board of Trade) advanced by 0.49%, settling at 8.63$/bushel. Soybean prices rose on the second consecutive day due to positive expectations from Chinese Delegation’s soybean exports and bright export demands. ETFs (exchange-traded funds) like the Teucrium Soybean Fund (SOYB) followed soybean futures prices on the CBOT and progressed by 0.11% on September 24.

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The US Department of Agriculture released its weekly export data for September 11–17, 2015, on September 24. Soybean net exports for the week ending September 17 increased by 44% from last week, reaching 1,316,000 metric tons for the 2015–16 period. China, Indonesia, Japan, Netherlands, Mexico, and Taiwan were major export destinations during this period.

Market reaction

The higher-than-expected increase in exports led to a significant boost for soybeans. Traders took it as a positive sentiment, expecting “low-and-slow” soybean exports, sales for which were down approximately 9%—a year-to-date low. But other encouraging data helped keep up enthusiasm for soybean exports, and so soybean futures prices still increased on September 24.

After a shaky start, Chinese demand looked strong, and so traders expected US soybean futures to climb. According to the Iowa Soybean Association Press, Chinese delegates agreed to buy 13.18 MMT (million metric tons) of US soybeans for about $5.3 billion. But the actual outcome fell short of positive expectations.

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Traders still expect soybean demand to grow in the near future, though many researchers believe that China is taking advantage of lower prices to fill its reserve levels, which fell during its drought in 2011–12. If China had taken the advantage of the weaker Brazilian real, there’s a good chance their hopes for new exports would have proven misguided.

Impact on related businesses

The agriculture sector facilitating Syngenta (SYT), Monsanto (MON), Agrium (AGU), and Chemical & Mining Compay of Chile (SQM)—companies that would not benefit much by slightly increased soybean prices, as it wouldn’t represent enough additional income to motivate farmers. Still, these companies’ stocks, along with the VanEck Vectors Agribusiness ETF (MOO), decreased on September 24, 2015.

 

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