Soybean prices plummet: suffer their ninth fall in 10 days and break through $350 in Chicago

He soybean price can’t find an apartment in the Chicago market: This Friday, it recorded its ninth drop in the last 10 days, continuously breaking through the US$350 per tonne mark. The decline in bean prices has been repeated almost without interruption since last May and there is no short-term reason to think that they will recover the lost ground. All of this represents very negative news, both for Argentine producers and for the Government and the Central Bank’s coffers.

The price of oilseeds fell 0.9% in this session to US$346.58, its lowest value in 18 years in real terms. Meanwhile, the Corn falls 0.3% to $147.14 but the Wheat rises 0.8% to $195.75.

The Chicago soybean price directly affects local prices. The price available on the domestic market is trades at constant values ​​at July 2019 levels.

Less than a month before the official start of the commercial campaign for soybeans on North American soil, the monthly supply and demand report from the United States Department of Agriculture (USDA) ““It was devastating for oilseed prices,” highlighted the Rosario Stock Exchange (BCR).

“New revisions to the projections for the upcoming campaign took the market by surprisewhich in the preview did not expect final stocks as large as those announced by the organization. The global 2024/25 campaign would have a record production, which is now estimated at 428.7 Mt, and the most important stock/consumption relationship of the centuryreaffirming the market bets that discount in prices an abundant amount of available supplies,” said the BCR.

Consequently, During the last week, the contract with the highest volume traded recorded a loss of 4% and reached Nominal minimums since September 2020 whereas, in constant dollars, The purchasing power of a ton of soybeans in Chicago has not been so low since October 2006..

Soybeans at 2006 lows: what are the causes of the sharp fall?

The current scenario is at the antipodes of what has been experienced over the last three years.with average prices exceeding US$500/t in all cases. Beyond the abundant current and projected supply, among the main factors that the market finds to support the dynamics in prices is China and its role as the main global buyer of beans, emphasized the BCR:

-On the one hand, the Speculations about the resurgence of a “trade war” between the Asian giant and the North Americans takes the pressure off demand for American beans. On the other hand, at a general level, the significant Liquidation of pig bellies in China This would imply a significant reduction in demand for soybean meal to meet the demand for feed for the meat industry, in a context with ample levels of stocks stored in Chinese ports.

-Added to this is the weakness of soybean flour and oil, whose prices fell by 2% and 14% month on month, putting even more pressure on soybean prices.

-The bearish bet by hedge fund managers in Chicago has doubled and, according to Refinitiv estimates, this week it will culminate with a new milestone, breaking the record set on July 16, managing to maintain a net short position in soybeans of more than 200,000 contracts (equivalent to 27 Mt).

In September, the harvest begins in full force in the northern hemisphere, so seasonally, supply pressure means that, in relative terms, the North American export prices become more competitive than those of South America. This pressure has begun to be reflected in FOB prices for the Gulf of Mexico, which are currently USD 11/t below FOB prices in Paranaguá, Brazil, the BCR said.

In this sense, in relative terms, the FOB price for soybeans shipped on the Gulf of Mexico in relation to its Rio de Janeiro counterpart has been below current levels in six of the last ten years. Therefore, given the current situation with violent realignments of relative prices, and the fleeting shift of Chinese purchases to the southern hemisphere, there are possibilities of a greater adjustment via prices, the BCR concluded.