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South American Export Competition Pushes Soybean Prices Down

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Dec. 4 2020, Updated 10:53 a.m. ET

Soybean prices fall

Soybean futures prices on the Chicago Board of Trade (or CBOT) for March expiry fell by 0.09% and settled at $8.72 per bushel on February 12, 2016. Prices slipped due to speculation that favorable soybean export conditions in South America might hurt US exports.

Following soybean prices on the CBOT, the Teucrium Soybean ETF (SOYB) fell by 0.46% on February 12.

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Favorable weather impact

Weather conditions in South American soybean-producing regions have been favorable. Argentine soybean-producing areas received anticipated rains during the week ended February 14, 2016. The precipitation is expected to favor the output consensus for the season.

Favorable weather and harvest progress in Brazilian soybean-producing regions are boosting South American supply. According to a report from the Mato Grosso Institute of Agricultural Economics, the soybean harvest is 25.6% complete, lagging only 0.9% behind the previous year.

Analysts believe that record production estimates could receive boosts from a weaker currency and higher planting reports. The favorable South American soybean export environment negatively affected US soybean prices on February 12, 2016.

The Argentine soybean supply that was anticipated to release due to a favorable export policy was halted by suppliers due to unfavorable currency reforms. With a favorable outlook on the promotion of agricultural production and the production of industrial food from agricultural products, soybean-related products such as soybean meal and soybean oil production could increase.

Analysts anticipate that soybean could find its way into the international markets from Argentina in huge quantities. This could hurt US soybean exports and soybean-related product prospects in the near term.

How fertilizer companies are affected

The fall in soybean prices negatively affects the stocks of fertilizer companies, reducing farm incomes. Despite the drop in soybean prices on February 12, 2016, share prices of CF Industries Holdings (CF), Agrium (AGU), Enterprise Products Partners (EPD), and CVR Partners (UAN) rose by 3.3%, 0.74%, 4.0%, and 1.3%, respectively.

The Materials Select Sector SPDR ETF (XLB) rose by 3.0% on February 12.

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