Soybean Prices Rebound with Help From China

By: John Trefethen, Director & Co-Founder

Recent prices of commodities have been a whirlwind. The pandemic has had varying impacts on both the supply and demand of most commodities. In addition, the ebbs and flows of trade discussions with China have caused meaningful price volatility. One commodity that is experiencing a resurgence in prices is soybeans. Since falling to their lowest level for 2020 of $8.22 per bushel on March 16th, the price per bushel of soybeans has risen to $8.71 as of June 24th, with consistent increases for the month of June.

Reaching a price of $8.71 per bushel is significant as this exceeds the $8.50 per bushel needed by farmers in order for their soybean crops to be profitable. Some traders believe that the current momentum could push the price per bushel price to $10 which would be their highest level in over a year.

Driving this recent upswing in prices has been China’s purchasing of US exports since a trade deal was struck and currency economics became more favorable. In the past month alone, China has purchased nearly 5 million metric tons of American soybeans according to the USDA. Soybean purchases by China made up approximately 56% of all new soybean exports compared to just 27% of US soybean sales through May, 2020. According to USDA Undersecretary Ted McKinney, the department expects that China will follow through on their commitment in phase-one of the trade agreement signed in January of this year and buy $36.5 billion of US farm goods in 2020.

This activity should continue to put upward price pressure on soybeans and prompt those in the supply chain to consider how to hedge their exposure to soybean prices that appear to be trending higher.