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Soybean prices slide on China's demand pause, COVID-19 resurgence: sources

Highlights

China's crushers booked majority of demand till Jan

COVID-19 resurgence raises uncertainty

Soybean prices lost ground in the last few sessions as a drop in purchases by Chinese crushers, a second coronavirus wave in Europe and Americas, coupled with recent rains in Brazil weighed on sentiment, market sources told S&P Global Platts.

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China's demand for US soybeans is seen as a key factor for bullish basis prices in 2020.

CFR China soybean price rose nearly 43% to its highest level of $500.45/mt between April 28 and Oct. 27, according to Platts data.

However, the recent lull in Chinese purchases of US beans has pressured the prices.

While SOYBEX CFR China, an S&P Global Platts assessment, shed $10/mt between Oct. 27 and Oct. 29 to fall to $489.98/mt, CBOT January futures dropped 2.63% at Asian close in the same period.

China's state-owned companies -- top buyers of US soybeans -- have not been purchasing the US-origin oilseed in the past couple of weeks with the same intensity as seen in September.

For 2020-21 marketing year, US soybean export inspection volumes, as of week ended Oct. 22, were seen at 14.34 million mt, compared with 8 million mt a year ago, with majority of the shipment destined to China.

Robust soybean demand from China supported soybean future prices, which attained a multi-year high average price in October. But the trend seems to be changing in recent weeks and China's crushers are seen reluctant to bid for US beans.

There were some speculations among market participants that China's state-owned crushers could resume buying US beans after the US Presidential elections, but views differed.

"Despite the ambiguity surrounding buying target linked to the Phase 1 trade deal, Chinese crushers may have already finished buying their quota of US soybeans for the current season, " a Shanghai-based agriculture commodities broker said.

Meanwhile, the demand from China's privately-owned crushers is expected to be limited for the US soybeans as well.

According to market sources, China's private crushers' demand for US soybeans could be less than 2 million mt for December and January.

Additionally, large backwardation between US January soybeans cargo and Brazil new crop beans hampered nearby demand, and was pushing soy demand to deferred months, enabling big discount on Brazilian new crop beans.

Brazil March cargoes have been offered at CFR China for over 70 cents/bu ($25.73/mt) discount to US Gulf January shipment, according to Platts data.

COVID-19 resurgence

The resurgence of COVID-19 cases around the world has also fanned bearish sentiment in the soybean market recently.

The announcements of lockdown and looming economic uncertainties have triggered a selloff in global commodities in the past couple of days, an Illinois-based commodities trader said.

Rains in Brazil

Brazilian soybean planting for 2020-21 had one of the slowest starts in a decade due to an extensive dry weather engulfing the primary oilseed producing regions between September and mid-October.

The delayed planting concerns stoked Brazilian soy supply fears for the first quarter of 2021, supporting limited supplies and high price environment.

However, recent rains have been a welcome relief for the farmers.

Brazilian soybean farmers have managed to plant 23% of the total estimated area until Oct. 22, against 8% a week earlier, according to the report from agricultural consultancy AgRural.

Although late plantings may cause potential harvest delay in Brazil, it is expected to have minimal impact on Chinese buyers as the Asian nation has already secured 90% of its February soybeans demand from Brazil, with 5.5 million mt booked in advance, according to sources.

With sagging demand for US beans by China in coming weeks, November soybean futures are expected to fall further and hover in the range of $10.40/bu - $10.60/bu in coming days, analysts said.