SOYB: Us Soybeans’ Futures Gain Buoyed by High Vegetable Oil Prices

May 7, 2021 08:10 PM ET
SOYB: Us Soybeans’ Futures Gain Buoyed by High Vegetable Oil Prices
  • The SOYB ETF was up 1.84% after it closed trading at $23.80 on May 6, 2021. 
  • FAO’s food price index rose 1.8% for vegetable oil in April 2021. 
  • April 2021 saw Chinese imports of soybeans soar by 11% year on year.

US (CBOT) soybeans’ futures gained +1.00% on May 7, 2021, from the previous day after opening at $1,585, their highest level in five years. 

Soybean prices were close to their 8.5 year-top owing to propped-up demand for more US acreage. Rallying vegetable oil prices helped boost soybeans prices as supply concerns rock the Brazilian agricultural scene due to dry weather. 

A good way to trade soybean futures is through the Teucrium Commodity Trust Soybean Fund (SOYB) ETF that tracks the movement of the Soybean futures. The SOYB ETF closed trading at $23.80 on May 6, 2021 (+1.84%). 

Imbalanced forecast

Brazil had forecast to produce 141 million mt of soybean volume in 2021-2022 (running until January 2023). This volume was set to be the all-time high production using an acreage of 40 million ha, up from 38.5 million ha (in 2020/21). 

Brazil’s soybean expansion was pegged on increasing demand (from China), high pricing, and a conducive exchange rate. However, dry weather has rocked the Brazilian agricultural space causing the government to issue supply concerns of the commodity. 

Soybean prices rallied to $15.47-1/4 a bushel (an increase of 0.9%) on April 30, 2021, after a +2.1% rise in the prior season. 

Dry weather also made the total corn forecast in Brazil in 2020/21 season decline 8% and reach 104.1 million tonnes. 

Wheat inched up 1.5% from 0.8% on April 30, 2021, to reach $7.45 – ½ a bushel. While corn is expected to test resistance at $7.21- ½, a surge above this point may see it rise to $8.49. 

Rising Food and Vegetable Oil prices

April 2021 saw the average food price index by FAO hit 120.9 points (+1.7% as compared to March 2021) and +30.8% year-on-year. This gain was heralded by high international food prices that rose for the 11th month (consecutively) into April 2021. The price index for sugar rose 3.9% (almost +60% YoY) owing to slow Brazil harvesting procedures that hurt global supplies. 

High quotations for global palm oil also made FAO’s price index for vegetable oil to also gain 1.8% in April 2021. The increase in quotations was a result of slower production growth estimated from the main exporting countries. 

This expectation raised the values of soy and rapeseed oil, directly affecting the price of soybeans. There was a moderate contraction in the prices of sunflower oil. 

Rising Soybean Demand

April 2021 saw Chinese import of soybeans soar by 11% year-on-year after the arrival of cargoes that had been delayed from Brazil. Customs data showed that China increased its importation of the oilseed units to 7.45 million tonnes from 6.714 MT. There was also an increase in US soybean imports from the US by China due to higher demand by crushers. 

Chinese crushers turned to US soybean productions after heavy rainfall in Brazil delayed harvesting and transportation of the commodity in March 2021. 

Reports also indicate that China increased its import of soybeans in the first four months of 2021 to 28.64 MT (+17% YoY). The Chinese soybeans demand range in April 2021 was expected to rise 10-15%. 

Additionally, China also increased its import of vegetable oils from January-April to 3.8 MT (+47.4% YoY), leading to a rise in the commodity’s price. 

Soybean Technical Analysis 

SOYB ETF is expected to find resistance at 24.00 then move low towards its psychological support at 22.43. ,

SOYB ETF Trading Analysis

SOYB ETF Trading Analysis

The RSI indicates that the ETF is overbought at 80.39, and we might see a decrease in the price momentum. However, prices are expected to rebound sharply and break the resistance point in Q2 2021 due to high oilseed prices.



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