Soybeans fail again in the face of the resistance at USD 9.10 a bushel, which caused the May/20 position to fall below 9.00 bushel near the end of trading on Friday. Coronavirus, renamed Covid-19, remains on the radar. The signs about the evolution of the virus remain ambiguous, which maintains the tone of caution amid traders.
Over the week the market also reflected expectations of growth in the US soybean acreage in 2020. The USDA’s 2020 Outlook Forum pointed to a US soybean area of 34.40 million ha (85 million acres), up 11.7% from 2019, when 30.80 million (76.1) were planted and slightly above the average of 34.20 million ha (84.6) expected by the market. The justification for the advance of this year’s area is the resumption of planting after climate problems in 2019 and, of course, a more positive outlook for the market after the signing of the US-China trade deal.
Despite the recovery, the soybean market still lacks fundamental strength. The main point of support would be the effective resumption of Chinese purchases in the United States, which has not yet happened. That is why there are so many doubts in the air. Will China fully comply with the agreement?
The deal indicates China’s purchases of 12.5 billion US agricultural products, but it does not specify which product. It is very generic. Therefore, some argue that China must, at first, prioritize purchases of meat, ethanol and DDG. With that, the purchase of US soybeans would only be resumed at a good pace from the middle of the year.
Without a steady advance of Chinese purchases in the US and in the face of supply pressure from South America, it is difficult to imagine a more consistent rise in soybean price in Chicago. There would only be room for corrections and adjustments linked to the mood of traders.