US soybean prices trending higher on dry weather, Brazilian supply tightness: sources

US soybean prices found bullish momentum in recent weeks on persistently dry weather in the Midwest and Brazilian supply tightness, according to sources.

According to S&P Global Platts data, SOYBEX FOB New Orleans for October loading was assessed at $375.98/mt on Aug. 25, up 2.45% month on month.

Dry weather in majority of the Midwest — the top US soy producing region — is expected to lower the soybean crop quality, which means a lower yield and decrease in supply in the 2020-21 marketing year starting Sept. 1.

The market is extremely bullish on US soybeans given the crop quality has deteriorated rapidly in the past two weeks, sources said.

According to the US Department of Agriculture's latest progress report, the domestic soybean crop condition was rated at 69% good to excellent, a fall of five percentage points in the past two weeks.

The shortage of top soil moisture in many parts of Midwest was in the 70% bracket as of Aug. 23, which is not conducive to soybean crop development, an analyst said.

In addition, the weather forecast for the next few weeks is not encouraging either.

The dryness continues to be most severe across central and western Iowa and has expanded across southern Wisconsin, northern Illinois, northern Indiana, and southern Michigan, weather agency Maxar said Aug. 24. Mostly dry weather is expected in these areas over the next week, which will allow dryness and crop stress to increase, it added.

Brazilian supply tightness

Brazilian soybean farmers have already sold over 95% of their 2019-20 crop and are reluctant to sell the rest.

China — world's largest soybean importer — has no option but to buy more US beans as Brazilian farmers have resorted to crop hoarding in anticipation of further price increases in the coming days, a Brazilian analyst said.

Brazil's soybean exports slumped 19% on the month in the first three weeks of August, according to the latest trade data, with sources signaling hoarding by farmers was underway due to expectations that prices would rise in the second half of 2020.

Brazil's soybean farmers are holding on to their crops and waiting on the US soybean weather, which is expected to dry up in the coming weeks and push international soybean prices higher, sources said.

Such decisions, however, have led to supply bottlenecks at Brazilian ports.

Platts assessed SOYBEX FOB Santos at $402.45/mt for October loading on Aug. 25, up 4% on the month.

According to the market participants, the US soybean price is expected to rise further on increased Chinese buying in September, when the US soybean harvest begins.

With limited availability of Brazilian soybeans until January 2021, the market expects US soybeans to be very competitive and the primary oilseed supply source for China in coming months.