Soybean prices find support in a weak dollar ahead of the WASDE report

By: Faith Maina
Faith Maina
Faith strives to break down complex developments so investors can make better informed decisions. When Faith is not immersed in the… read more.
on Dec 9, 2020
  • The weak-dollar environment has helped cap the fall of soybean prices.
  • While the weather in Brazil has improved, South America is still experiencing La Nina.
  • Investors are awaiting tomorrow's WASDE report for insight on soybeans' supply status.

Soybean prices have risen by 0.56% to trade at $11.52. Today’s rally comes after largely being in the red in the current month. The improving weather in Brazil and better-than-expected US exports have eased concerns over tight supply. However, a weaker dollar and the ongoing La Nina have capped losses. Investors are awaiting tomorrow’s WASDE report.  

soybean prices

US Dollar’s downward trend caps soybean losses

Soybeans are traded in US dollars. A weakening dollar creates a favorable environment for soybean prices as traders are able to purchase more product. The greenback has been in the red for 4 consecutive weeks.

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Today as at 11.33 GMT, the dollar index was down by 0.19% to trade at $90.79. The dollar’s downward trend has helped cap soybean losses. While the US soybean futures have been in the red for 3 consecutive days, they are still trading above yesterday and last week’s low of ~$11.42.  

US dollar index

Soybean prices react to improved South American weather

Brazil is the largest exporter of soybeans in the world. Similarly, Argentina is among the top soybean producers. Over the recent past, soybean-producing areas within the two countries have experienced harsh weather conditions.

In Brazil, La Nina was characterized by insufficient rainfall and high temperatures. The unfavourable weather, which impacted the nation’s soybean planting season, raised concern in the soybean market.

However, the weather in South America seems to be improving; which is a bearish signal for soybean prices. The Commodity Weather Group has indicated that the central and southern regions of Brazil, as well as northern Argentina, will receive more rainfall in 6-10 days. In northeast and centre-west Brazil, meteorologists expect rainfall in 11-15 days.

While the weather changes have eased concerns over the tight supply of soybeans, South America is not out of the woods yet. A Singapore-based trade stated, “Brazil has had some rains which are weighing on the soybean market but parts of Argentina are still dry.” This status quo has offered support to soybean prices.   

Investors await the WASDE Report

The US Department of Agriculture is set to release estimates on the supply and demand for US soybeans, as well as other agricultural commodities, on 10th December. Investors are keen to see if the numbers will indicate a continuation of tight supply.

November’s outlook for the 2020/21 season showed reduced yields. Soybean production was expected to lessen by 98 million bushels to 4.17 billion bushels.

In the US, major producing regions like Iowa, Illinois, and Nebraska recorded lower yields. Besides, lower production in Argentina contributed to the forecasted reduction of foreign oilseed production by 5.6 million tonnes.     

On 7th December, the USDA indicated that the weekly soybean export inspections were lower than the figures from the previous week. However, the numbers still exceeded expectations. The amount of soybean inspected for export was about 2.297 million tonnes, which was 126,731 tonnes lesser than the previous week. Egypt and China were the main destinations of the commodity.

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