Soybeans fails to recover level of USD 9.00 a bushel in Chicago


       The advancement of coronavirus continues to set the tone of markets. The new stage of the epidemic, with its spread outside of China, generates a lot of nervousness worldwide. The result is an increasing risk aversion, which causes stock and commodities markets to fall, while the dollar gains value against emerging currencies. Last Friday (28), the CRB index fell more than 2%, pressured by the 5% decline in oil.

       Soybeans fell 0.25% last Friday, with the May/20 position ending the week at USD 8.92 a bushel. The pessimism generated by Covid-19 was softened by news of the suspension of soybean exports in Argentina. Thus, soybeans end February with a positive balance of 0.68%. But the slight gain in February is not enough to mitigate the losses accumulated over 2020, which remain high and hit 7.9%.

       After the fall in January, February was a month of consolidation, which brings some relief. The evolution of coronavirus and demand from China are expected to drive the soybean movement in Chicago in March. The acceleration of the spread of the virus, especially a regression in the disease control in China, could add negative pressure to soybean prices on the U.S. exchange. And that would take the level of USD 9.00 a little bit farther. Greater control of the epidemic, on the other hand, stimulates the upward corrective movement, breaking the lateral logic of the past few weeks. In this case, the market would find support so that the May/20 contract can advance above the level of USD 9.00 a bushel.

        Another turning point is the performance of U.S. sales. News of Chinese purchases in the United States is expected to give an additional boost to prices in Chicago. That would support the May/20 position to advance towards levels between USD 9.50 and 10.00 a bushel. However, this impulse to prices is linked to the volume of Chinese purchases. The fact is that coronavirus and the strong competition from South America play against the expectations of a good flow of U.S. sales to China, at least at this time of year.

       In turn, to surpass the barrier of USD 10.00 a bushel with consistency, fundamental support is needed. High global soybean stocks must keep limiting more significant gains on the U.S. exchange. To break this logic and bring more bullish strength to prices in Chicago, a more significant fall in stocks is needed. That would happen if production fell. In a scenario of consolidation of the South American crop, the next risk to production is the 2020 U.S. crop. Thus, a problem with the next U.S. crop would support a more significant advance in the world balance of soybean prices. It is good to remember that the next U.S. crop begins to be drawn from the first planting intention, to be released by USDA in late March.