Can the Soybean Supply Be Strong amid Weaker Sentiments?



Soybean prices increase

The November CBOT (Chicago Board of Trade) contracts of soybean futures rose by 0.86%, and they settled at $8.89 per bushel on September 29, 2015. Soybean prices increased due to declining supply sentiments in international trade.

On September 29, 2015, the Teucrium Soybean ETF (SOYB) advanced by 0.48%, following soybean futures prices on CBOT.

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Brazil’s soybean crop

In 2015–2016, the Brazilian soybean crop is expected to be one of the most expensive crops. Currency devaluation is playing the double-edged sword as fertilizer and pesticide costs would constitute the most of the increment for the new plantations. With higher-than-anticipated fluctuations in the currencies of South American countries and the US dollar, analysts are likely to fear the possibility of negative income. The challenge for Brazil’s soybean sector is to show increased productivity and yield with reduced sowing to restrict the rising risk.

According to industry analysis firm Oil World’s September 25 report, global oilseed supplies are falling. There have been reports of reduced exports from India. Chinese soybean crop output might fall to a 22-year low to 10.5 metric tons (or MT). Argentina’s soybean output might fall by 4.2% to 57.5 metric tons, and Brazilian soybean output may rise by 1.% to 97.5 MT.

Aggregate world soybean supplies are expected to decline by 500,000 MT to 315.3 million MT from August 2015 estimates. With the Chinese slowdown putting pressure on the exports, weaker sentiments constituted consensus in the market for weaker export sales. In the declining supplies sentiment from around the world, there might be increased chances for US soybeans to perform better in export sales. This could support soybean prices.

Impact on related stocks

Agriculture sector facilitating companies like Martin Midstream Partners LP (MMLP), Syngenta (SYT), Chemical & Mining Co. of Chile Inc. (SQM), CVR Partners LP (UAN), and Enterprise Products Partners LP (EPD) would be hurt with a rise in soybean prices. These businesses’ products could lose marginal sales to maintain production, which is needed to retain their yield.

These stocks declined on September 29, 2015, as soybean prices advanced. However, the VanEck Vectors Agribusiness ETF (MOO), which has an interest in these stocks, rose by 0.22% on September 29, 2015.


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