Trading of soybean futures, corn futures and wheat futures were closed on Monday for Presidents' Day. Yet, since last week, Soybean March-to-May futures look odd in their atypical upsurge across the entire grain-and-bean group. Thus, on Friday, February 17, the most-active soybean contract on the Chicago Board of Trade (CBOT) was up a robust 0.79% to $1539-2 (+$12-0 a bushel) at the close.

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What is the story behind this odd price performance? This mini-rally apparently occurred on the heels of some past weekend news. In fact, over the past week, soybeans fell 0.8%.

The news is that soybean harvest in progress in Brazil, where it’s forecast was lowered by a number of agricultural consulting firms. Now for Brazil's soybean production, it is expected to lower to 150.9 million tons from 152.9 million tons previously estimated (though still represent an all-time high if realized). However, the forecasted early frost in the coming days could undermine the already struggling soybean and corn crops in the south of Argentina's main growing region, the Buenos Aires Grain Exchange (more below). 

Also, according to USDA, the U.S. soybean crush forecast for the 2022/23 marketing year is reduced in February by 15 million bushels to 2.23 billion bushels. However, the season-ending stocks are raised by 15 million bushels to 225 million bushels. Based on early priced soybean sales, USDA revised its forecast of the U.S. season average farm price to $14.30 per bushel from $14.20 last month. The ERS released their 10-Yr projections for soybeans, suggesting that 23/24’s baseline acreage would be 87 million with a 52 bpa (bushels per acre) yield. Stocks would grow some to 226 mbu, with a $13 cash price. By the end of the decade, crush is seen working higher to 2.5 bbu/Yr, with exports maintained between 2 – 2.2 bbu/Yr.

As it was mentioned above, due to hot dry weather, Argentina’s soybean harvested area and yield for 2022/23 were lowered this month. Consequently, Argentina’s soybean production forecast is reduced by 4.5 million metric tons to 41 million metric tons. In addition, the soybean harvested area is estimated at 15.9 million hectares, down 0.4 million hectares. The hot and dry weather in Argentina’s major producing provinces through mid-January had further aggravated planting and reduced crop yield forecast. Argentina's worst drought in six decades has already forced farmers to delay planting this season's soy and corn crops, lowering expectations for the season's yields.

The U.S. Department of Agriculture is expected to release unofficial forecasts for 2023 plantings and production of major U.S. crops at its annual two-day Outlook Forum this week. In our previous soybeans report, we already mentioned soybean futures and options that were opened for trading on the Dalian Commodity Exchange (DCE) to foreign traders on Dec. 26 last year. Prices there also demonstrated steady upward movements. The most active No.1 Soybeans contract (b2303) added 10 yuan/5K bushel over the past week, while b2304 (April) contract increased by 54 yuan/5K bushel.

Summary:

Both U.S. and China’s soybean futures demonstrate a joint upward price momentum as a result of adverse weather conditions in several typical harvest regions including Argentina and Brazil, as well as lowered expectations about the upcoming crush yield – particularly, in the U.S. That makes us believe in the coming 1-2 weeks soybeans will keep outperforming most of its peers in the group.

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