This could be a record year for supply tightness, on the back of relentless buying from China, according to economists at OCBC Bank who are looking for a new record high in soybean prices in the current season. 

Key quotes

“We are assuming a 78% completion rate in American soybean exports at week 23 of the season. Even assuming the US exports a conservative 70K bu of soybeans a week, USDA’s estimate of 2.25 B bu will be met in six weeks from now at week 29 of the 53-week season – a staggering statistic.” 

“When one considers that the current carryout estimate in the US is only 140 M bu, another 100 M bu depletion in stock would leave the US perilously low on stock – indeed, we cannot even begin to fathom stocks being that low in the US Prices need to rise – high, fast and sharp, to start inciting cancellations from Chinese buyers.” 

“The current side-way movement of the soybean market presents an opportunity to build a long position. We see prices for May’21 and Jul’21 contracts to set new record highs of >$17.50/bu from the current $13.70/bu.”