Soybean Prices Once Again Reaffirmed Strong Fundamentals

On Wednesday, the USDA released its January Supply/Demand, WASDE, and Quarterly Grain Stocks reports. Traders immediately followed the document’s narrative and calculations. As a result, the CME Group’s soybean market initially moved lower but thereafter turned higher, while corn was lower, and wheat was lower too.

According to the USDA, while the U.S. 2021 corn and soybean crop estimates remained unchanged, this year’s Brazil soybean crop was projected to shink, which serves as the main impetus for soybean prices to keep advancing. For soybeans, the USDA pegged output at 4.43 billion bushels, a new all-time high with 21 states reporting record-high yields. The trade’s expectation was 4.4 billion vs. the government’s November estimate of 4.42.

The story about the impending shortage of soybean crops in 2022 isn’t anything new. Back in November, in its then-current monthly WASDE report, the USDA forecasted soybean production at 4.425 billion bushels on a yield of 51.2 bushels per acre, below consensus estimate and down from the USDA's October forecast for a 4.448 billion bushel crop with a yield of 51.5 billion bushels. The reduced yield forecast took traders by surprise back then after Chicago soybean futures had dropped to their lowest price since December 2020 ahead of the report.

Currently, for yield, the soybean average is pegged at 51.4 billion bushel/acre vs. the trade’s expectation of 51.3 billion bushel/acre and the U.S. government’s previous estimate of 51.2. March soybean futures closed 12 3/4¢ higher at $14.08. May soybean futures ended 12 3/4¢ higher at $14.13. New crop November soybean futures ended 12 3/4¢ higher at $13.12.