According to recent figures from the Chicago Board of Trade (CBOT), the first week of November saw the market price of soybeans reach its highest point since July 2016, trading at USD 11.18 a bushel. Record soybean prices in November were largely due to strong Chinese demand and news of promising data regarding a potential COVID-19 vaccine.
Factors influencing the increase in Soybean prices
China remains the world's largest importer of soybeans, importing USD 59.5 billion in 2019. The Chinese market has recently experienced an increase in the demand for soybeans, evidenced by a 41% jump in imports in October, compared to the same period last year. This led to China’s soybean import figures for the month of October reaching 8.69 million tonnes, a marked increase compared to the 6.18 million tonnes that were imported in the same month a year ago.
Top 5 Soybean Importers
HS Code: 1201 Soya beans, whether or not broken
Unit: USD thousand
Source: ITC Trademap
In addition, after the release of results from German company BioNTech SE and US pharmaceutical firm Pfizer Inc stating that the COVID-19 vaccine currently under development is 90% effective in preventing the virus, the news propelled a recent spike in soybean prices. This is as the development of such a vaccine could potentially lead to a global economic recovery, which has led to an increase in investor confidence and caused a gain in soybean prices.
Market Outlook
Despite record high soybean prices reported during the first week of November, prices are expected to normalise throughout the rest of the month. Certain regions in South America experienced sustained periods of dryness in 2020, with severe drought spreading throughout Brazil, Paraguay, Bolivia and Northern Argentina. This has affected water levels and the delayed spring rains led to setbacks in new plantings of soy. With Brazil, Paraguay and Argentina among major producers of soybeans, adverse weather remains a concern for producers. Experts anticipate that if these weather conditions persist during the 2020/21 season, this may deplete the global supply of soybeans further and in turn cause prices to rise.
Sources:
Reuters. “GRAINS-Soybeans ease from 4-year high, strong demand limits decline.”
Financial Post. “Soybeans ease from 4-year high, strong demand limits decline.”
Successful Farming. “GRAINS-SOYBEANS EASE FROM 4-YEAR HIGH, STRONG DEMAND LIMITS DECLINE.”
Successful Farming. “GRAINS-SOYBEANS NEAR 4-YEAR HIGH ON CHINESE DEMAND, S.AMERICAN DRYNESS.”
Business Tech. “Pfizer’s Covid-19 vaccine found to be 90% effective.”
NASA, Earth Observatory. “Severe Drought in South America.”
The Edge Markets. “La Nina may disrupt global food supply, send prices higher.”