-
After a sluggish start to the week on Sunday night, soybean futures have bounced back, gaining over 30 cents from their low point.
-
The President of the United States is still discussing increasing sales to China.
-
However, it’s worth noting this is quite typical for this time of year. If you look at the real fundamentals—like spot prices, basis, and futures spreads—you’ll see we’ve been aware of this since the end of September.
Right after I chatted with Jesse Allen on the “Agriculture of America” talk show Monday morning, I got a message from a friend in the securities sector. He said, “Maybe there’s something in the latest headlines…” I poured myself another drink—because honestly, it helps me cope with all the craziness lately—and asked, “What’s the headline?” But deep down, I already knew. We all do. Yes, the President likely mentioned, “We’re going to see more sales from China…” This reignited discussions, as expected. But here’s what we actually know:
- During this time, China often buys and ships secondary goods from the U.S. You can notice this trend on the seasonal chart:
- National Soybean Index
- National average base
- Moreover, since late September, we’ve observed weekly futures spreads that account for full commercial carry, which doesn’t happen very often.
- However, the “agreement” that the U.S. President keeps highlighting features a familiar aspect:
- China can opt for futures instead of purchasing physical soybeans.
- China has the flexibility to buy from suppliers at the best available prices.
Considering this, it’s intriguing that prices at Brazilian ports remain lower than those at the U.S. port of New Orleans.
You might remember that I mentioned the soybean futures market’s modest overnight rally in Monday’s Morning Commentary. The week kicked off with January futures facing pressure after last Friday’s notable decline, dropping by up to 10.25 cents. However, since then, the contract has climbed by approximately 10 cents, reaching a peak of 10.25 cents and is now trading at a high as of this moment. Does this suggest that major buyers are seizing the opportunity from the USDA-induced decline to replenish some of their secondary cash supplies? That seems likely. Or maybe those buyers are just engaging in the futures market following the latest “trade”? Hard to say. I honestly don’t know when or if daily export sales reports will be available again, or how long the current political calm will hold up. The bigger question is, does this even make sense, knowing that these days decisions are often swayed by a single person with a social media account?
In truth, nothing remarkable has changed in the U.S. soybean market. Except for the endless chatter.
For the record, January is currently up 24.5 cents on a volume of 130,000 units, and nearing its trading high as of this writing.
