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Soybean prices climbing due to South American weather

Soybean prices climbing due to South American weather

Prices neared $16 per bushel on Monday afternoon

By Diego Flammini
Staff Writer
Farms.com

Weather issues in South America are contributing to higher soybean prices.

As of about 12:30pm ET on the Chicago Board of Trade on Monday, soybean prices were at $15.83 per bushel.

Argentina and Brazil, South America’s largest soybean-producing countries, are amid dry weather, said Moe Agostino, chief commodity strategist with Farms.com Risk Management.

“It was a very dry December for parts of Brazil and Argentina,” he said. “Some rains did come in the second half of January to improve crop conditions a little bit but nothing more.”

A second consecutive La Niña is causing the dry weather.

In December, NASA announced La Niña is expected to remain until at least this spring.

A back-to-back La Niña hasn’t been seen in multiple years, Agostino said.

“You’re talking back to 2012,” he said. “You get some periodic rains, but that’s all they are. Then the pattern turns to hot and dry again, which is where we’re at now.”

Markets are concerned with how this weather will affect production.

Both Brazil and Argentina’s estimated production have been reduced by millions of metric tons, Agostino said.

“We’ve reduced Argentina’s production by about 8mmt,” he said. “The original projection was 50mmt and now we’re down to 42mmt. For Brazil, the soybean crop started at 145mmt and now we’re somewhere between 120 and 125mmt.”

Those numbers equal about 30 million metric tons of soybeans.

“That’s almost 1.3 billion bushels,” Agostino said. “Who’s going to replace that?”

And prices could go up even further if a major soybean consumer comes to the table.

China is the world’s largest soybean user and the country needs soybeans.

Chinese buyers were waiting for the South American crop to come in. But with weather challenges hindering the crop, farmers could see prices go even higher.

“What’s not factored into this price appreciation is Chinese buying,” Agostino said. “I think they were waiting for the South American crop and that looks like it could be a mistake on (China’s) part. If they show up, get ready for higher prices.”

Farmers may be tempted to lock in a price now.

But a little bit of patience could pay even more dividends in the future, Agostino said.

“This is an inflationary year and money is flowing out of stocks and into commodities,” he said. “You pair that with the environmental issues and it’s a perfect storm leading to higher prices. You could be looking at $20 (per bushel) beans if you’re patient.”


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