After a long climb upward, soybeans seem to be stumbling at prices above $10 per bushel.
But there is little reason to expect a major drop in soybean prices soon, says a U.S. analysis firm.
“Until we start to see pod filling in South America, which happens in January, and if there’s still good demand, we would anticipate sideways to higher markets for soybeans,” said Joe Victor of Allendale, Inc.
Strong soybean prices usually mean good canola prices, because the beans tend to set the market mood for the world’s vegetable oil crops.
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Soybeans have slackened their ascent recently, which Victor attributes to weakening crude oil prices. Soybean oil prices have suffered as petroleum has dropped in recent days, a relationship that shows soybean oil is definitely valued by the marketplace as an energy commodity.
But soybean oil didn’t slide as much as crude oil, suggesting that soybeans may be better able to maintain their strength into the new year.
“We’re really sort of surprised that we didn’t see soybeans collapse,” said Victor. “We’re a little bit surprised that it hasn’t broken hard, based on the break in crude oil.”
Underlying soybeans’ strength is the huge hunger in China for U.S. soybeans, he said. So far this year Chinese imports of U.S. soybeans are up 28 percent.
If that continues, it will be good news for U.S. soybean prices.
However, if the U.S. currency strengthens, which has begun recently, demand could slacken. And that’s particularly true if the U.S. dollar increases in value and the Brazilian real falls.
Chinese buyers might find cheaper soybeans for sale in the southern hemisphere.
“We might start to see China become less enthusiastic about buying U.S. beans,” said Victor.
While he expects near-term strength in soybean prices, that might not hold through the winter if South America experiences good conditions. That continent is more important than ever to the soybean market.
“It’s not just Brazil and Argentina any more,” said Victor.
“It’s Uruguay, Paraguay and Bolivia. They’re working towards a record crop this year.”
The slow and steady rise in soybean prices, after the early October stumble, hasn’t been reflected in canola, which was caught in the doldrums from September to mid-November, trading mostly between $450 and $460 per tonne on the Winnipeg Commodity Exchange contract.
As the Canadian dollar rose, canola prices were stagnant, losing pace with soybeans. But recent weakness in the Canadian dollar compared to the U.S. dollar has allowed canola to rise again.
Canola prices have recently been above $470 per tonne.
Victor said U.S. soybean prices on the Chicago Board of Trade contracts appear to have technical support at $10.65 per bu.
“If that should break, we could slip to $10 pretty fast,” he said.
