Soybean Futures Have Continued To Move Higher In 2021

January 29, 2021 12:50 PM
Soybean futures

Soybean futures

After starting 2020 on a high note, soybean prices steadily moved lower heading into the end of Q1, coinciding with the start of the Covid-19 outbreak. Covid-19 added more strain to a market that was already tense due to the U.S.-China deal. 

On January 15th, then President, Donald Trump signed phase 1 of the deal. According to USDA data, China had purchased 6.1 million metric tons of soybeans in 2020 as of July 16th. As we monitored purchases through Q3, we saw continued tension between the 2 countries affect long-term buying. The U.S. ordered Chinese consulates to be shut down in America and, in retaliation, China ordered U.S. consulates to be shut down in China. 

As those back and forth tactics played out, we entered the time of year where weather premium and crop progress take control of prices. Buyers became active as weekly USDA reports were good indicators of what weather patterns were doing to crops, mainly in the Midwest. 

Our attention at the end of year turned to the complex. Sales kept the attention of investors and provided guidance to where prices were headed. Halfway through the 2020 calendar year, sales in soybean meal came in lower than expected while sales of soybean oil came more in-line with expectations. We navigated through the summer months with this data and it was our map for the remainder of 2020.

As 2021 began, soybeans continued to move higher. New highs have been made, but the continued unknown of the macro picture of commodities is still driving the ship. Volatility will continue this year; now that President Biden has been sworn into office, investors are monitoring how this will change the U.S.’s relationships with many countries. Will the U.S.-China relationship continue down the path it’s on? Will changes be made by either side to correct this? 

One of the main focuses of President Biden’s first 100 days in office is the response to Covid-19 and the vaccine rollouts. Depending on the way these factors go in Q1, they could guide traders throughout the rest of the year. 

Weather premium will also be a story to watch. Key growing regions are experiencing dry conditions, potentially affecting the new crop later in the year. If crops are affected by the lack of moisture, prices could be headed back to the highs we saw at the time of the January 2021 USDA report that surprised many. 

Grain Stocks and Crop Production boosted prices, then the market experienced profit-taking and some of the biggest drops we’ve seen in prices during a volatile few days following the USDA data release. That said, soybean futures prices have been resilient and on a steady march up to $14.50. 

2021 could see a commodity bull market return— soybeans would be a commodity to watch. There are plenty of fundamental stories to keep the trade interesting, as well as solid technicals to guide investors as prices continue to climb.

About the Author

Peter Mooses is a commodity broker at RJO Futures. He enjoys the analytical aspects of futures trading and appreciates the economic impact that commodities have across all markets. Peter utilizes market analysis and trends to help clients achieve a balance between risk and return, while always keeping their investment objectives top of mind. Follow Peter on Twitter @PMoosesRJO