Chicago soybean futures experienced a slight increase on Wednesday as the U.S. dollar weakened from 11-month highs. However, prices still remained near their lowest point since 2021. This trend can be attributed to a combination of a better-than-expected U.S. harvest and the rapid planting of crops in Brazil.
While soybeans have seen a decline of approximately 9% in the past five weeks, falling to $12.57 on Tuesday, they have not reached their lowest point. The decline in soybean prices has been influenced by the strength of the U.S. dollar. As the dollar strengthens, dollar-priced commodities, such as soybeans, become more expensive for buyers with other currencies, ultimately reducing demand.
In addition to the stronger dollar, the U.S. harvest is well underway, leading to increased supply in the market. Moreover, recent government data has shown a slight improvement in bean condition ratings. Commodity broker StoneX has also raised its forecast for the average U.S. soybean yield, estimating production at 4.175 billion bushels.
Although there have been private sales of U.S. soybeans to China, indicating that there are buyers in the market, basis values for soybeans shipped to the U.S. Gulf Coast for export have remained steady or decreased. This suggests that demand may not be as strong as desired.
On the other hand, Brazil, the world’s largest soybean producer, is experiencing record-breaking planting rates. Farmers in Brazil are planting new crops at the fastest pace on record, indicating that the country is forecasted to produce a record soybean crop this year.
In terms of wheat, the U.S. Department of Agriculture reported a purchase of U.S. soft red winter wheat by China. This marks the first purchase of its kind since July 2021. However, wheat prices fell to a three-year low on Friday due to an abundance of cheap exports from Russia.
Furthermore, Ukraine announced its plans to expedite exports of grain and other agricultural products under a wartime deal. This would involve shifting some border checks from its main frontier with Poland to the Lithuanian port of Klaipeda. Additionally, two more vessels are heading towards the Ukrainian Black Sea port of Odesa.
In the European Union, soft wheat exports have decreased by 24% compared to the previous year. However, Morocco is expected to purchase 2.5 million tonnes of soft wheat, which is half of its annual needs, from France by June 2024.
Overall, the fluctuation in soybean and wheat prices can be explained by various factors such as currency valuation, supply and demand dynamics, and planting conditions in major producing countries. It is important for market participants to closely monitor these factors to make informed decisions.