Soybean prices seen rising in Q1’21 on Brazil’s dry weather, China’s strong demand

By Onome Amuge

The current untimely dry weather in South America, coupled with the worrisome lack of moisture, is likely to raise soybean prices more than 40 per cent higher in the first quarter of 2021.

Market analysts project that the persistent dryness could cause irreparable damage to this year’s Brazilian soybean crop and send futures prices for the grain as high as $18 a bushel, up from $12.43.

Sal Gilbertie, founder and CEO of Teucrium Trading, a commodity exchange-traded fund company based in the U.S, explained that South America is a little too dry and as a result, could have a serious lowering of the crop estimates over the next three months in Brazil, the world’s largest soybean exporter.

The rally is further fueled by an increase in demand from China,the world’s largest importer, which needs the grain to feed livestock as it brings its hog herd back to full strength following 2019’s devastating outbreak of African swine fever.

A recent report from S&P Global showed that the disease led to the slaughter of more than 200 million Chinese pigs in 2019.

Estimates by the U.S Department of Agriculture (USDA) predict that the world’s most populous country and largest pig producer is expected to import 100 million metric tonnes of soybeans for the 2020-21 season, a 21 per cent rise from the 2018-19 season.

Gilbertie believes China’s record importation of soybeans is good news for the U.S as it will help boost the North American soybean exports.

Shawn Hackett, president of Hackett Financial Advisors, stressed that while recent spotty, sporadic rainfall gave some relief to the crop in Brazil, the much-needed rain is likely to give way to more drought which could irreparably damage the crop in January and February.

Hackett further asserted that buying soybean futures is risky, especially when basing trading on weather forecasts as some decent rain in Brazil could quickly rescue a partially depleted crop and send prices lower.

He advised that anyone buying a soybean futures contract should observe the market and be prepared to close their position if the Brazilian weather turns decidedly from dry to wet over the next few weeks.