Soybean market tightness to continue as supply concerns persist

GLOBAL- Soybean futures reached new highs after Bunge raised concerns about dwindling supplies in Argentina,
according to CRM Agri’s oilseeds market outlook reports. 

The upward trend has been primarily driven by concerns over soybean supplies in Argentina, the world’s leading meal-exporting country. The country has faced a reduced soybean harvest in 2022/23 due to drought conditions, leading to worries about supply tightness. 

Greg Heckman, the CEO of Bunge, one of the world’s major agricultural companies, has stated that the market tightness will continue through the first quarter until South America’s 2023/24 soybean harvest becomes available. 

In Brazil, uncertainties regarding the 2023/24 soybean output have emerged, primarily due to dry conditions in the central growing belt. However, concerns about Argentina’s soybean production have lessened due to the arrival of rains, typical of El Niño periods.

The United States is experiencing seasonal pressure on its soybean harvest, with only 15% of the crop remaining in the field as of Sunday. Nonetheless, soybean crush margins continue to remain favorable, supporting demand for the oilseed.

Moreover, the CRM Agri team has noted improved profitability in the European rapeseed crushing sector. The weakening of rapeseed prices has led to an autumn recovery in crushers’ margins, despite soft rapeseed oil prices and local rapeseed meal prices underperforming compared to Chicago soymeal. 

However, the dynamics in the market have encouraged an increase in EU rapeseed imports, though they remain 37% lower year on year at 1.5 million metric tons in 2023/24.

The soybean market is expected to face continued tightness in the coming months, influenced by various factors, including global weather patterns, supply concerns, and geopolitical developments. 

The CRM Agri team has emphasized that Europe’s demand for rapeseed will be influenced by factors such as the course of the crude oil rally and Middle East tensions, including the Israeli-Hamas conflict. 

If the conflict escalates into a regional conflict, it could lead to increased demand for biodiesel and subsequently impact rapeseed prices. The World Bank’s forecast of Brent crude prices reaching US$150 per barrel in such a scenario could have substantial implications for the market.