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Market Signals to Sell Soybean Stocks
10.03.2022 11:10 "Agro Perspectiva" (Kyiv) —
According to the report of the USDA Oilseeds: World Markets and Trade (March 2022), with a decline in South America soybean production and uncertainty regarding export prospects for sunflower products out of the Black Sea region, soybean prices have risen dramatically in recent months. The May contract on the Chicago Board of Trade (CBOT) has risen 38 percent since early December, or nearly $4.70/bushel, to $17.07 on March 8. The November contract for new-crop soybeans has risen at a more modest pace (21 percent), adding nearly $2.60/bushel to the contract price since early December. This has led to a widening premium for old-crop soybeans versus new-crop in the United States. Premiums that were near 2 percent in November 2021 are currently 15 percent in early March. The result is higher prices and widening premiums which encourage selling now versus holding stocks into the 2022 U.S. harvest. However, it also discourages near-term purchases by buyers that can afford to wait until later in the year. This is observed in U. S. Export Sales data which shows a faster pace of sales for new crop soybeans, particularly to China. In addition, China is expected to increase reserve selling that will offset some near-term sales from Brazil in the coming months. A slower pace of China soybean imports from Brazil is almost a necessity given the current high prices and dramatic decline in soybean supplies in South America. Strong soybean price appreciation observed for February has slowed for the November contract in early March suggesting a better balance of demand with supply, at least in the longer term. However, considerable volatility remains possible, particularly in near-term contracts, given the changing situation in Ukraine and energy markets and with U.S. planting intentions due at the end of the month.
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