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Will Speculation of More Domestic Demand Affect Soybean Prices?

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Oct. 14 2015, Published 11:58 a.m. ET

Soybean prices rise

December soybean futures contracts trading on the Chicago Board of Trade (or CBOT) surged 3.0% and settled at $9.14 per bushel on October 13, 2015. Soybean futures prices increased due to strengthening domestic and international demand sentiment. The Teucrium Soybean ETF (SOYB) followed CBOT and rose 2.7% on October 13.

The soybean demand from China has started realizing the expectations. China bought 240,000 tons of US soybeans from the 2015–2016 crop on Tuesday, October 13, 2015. With the purchase, the soybean export demand sentiment from China strengthened. Soybean prices reacted sharply to the demand sentiment rise and increased $0.26 on October 13.

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Crop progress report

The crop progress report released on October 13 was encouraging for soybeans. Harvest progress was at 62%, higher by 8% than the last-five-year-average for the week ended October 11, 2015.

The soybean dropping leaves, a sign of crop maturity, was at 92%, slightly ahead of the last-five-year-average of 91%. The quality of the crop has been steadily in the good-to-excellent range at 64% from the previous week, less than the last-five-year-average of 73%.

Soybean commercial buying was at its peak. According to the October 2015 World Agriculture Demand and Supply Estimation report, the domestic crushing units have a good opportunity at the current level to buy, as the margins at the level have been attractive.

Increasing international demand has realized recently, especially from China. The price pattern for US soybeans is showing indications of a rise, as it breached the resistance level at $9.02 per bushel on October 13, 2015. That could begin an increasing long-term price trend in soybeans. 

Company performance

Martin Midstream Partners (MMLP), Chemical & Mining Co. of Chile (SQM), CVR Partners (UAN), and Enterprise Products Partners (EPD) fell 1.3%, 2.1%, 0.39%, and 1.7%, respectively, on October 13, 2015. The VanEck Vectors Agribusiness ETF (MOO) also fell 1.6% that day.

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