Soybean prices head to the overbought territory as it hits a 6-year high
- With an RSI of 78.24, soybean prices are headed to the overbought territory.
- Soybean futures are trading at $1253, which is the highest level since July 2014.
- China's recovering pig herd and South America's harsh weather has fueled soybean prices' upward momentum.
Soybean prices are headed to the overbought territory. With an RSI of 78.24, the prices are likely to pull back as the commodity investors take their profit. The soybean futures are up by 0.44% to trade at $1253. The price level is its highest since July 2014. The upward momentum is due to the unfavourable weather conditions in South America.
Adverse weather conditions in South America impact soybean prices
One of the factors that have contributed to the upward trend of soybean prices is the unfavourable weather conditions in South America. Over the past months, soybean-growing areas in Brazil and Argentina have been struggling with La Nina.
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At the onset of December, weather watchers in the soybean market were hopeful that the situation would improve after rainfall hit the Brazilian ground. However, the recorded amount is below normal, with temperatures remaining above normal.
Most regions within Brazil have received rainfall of about 20%-50% of the usual amount. In Argentina, farmers have continued to struggle with drought. These conditions have heightened concerns over the commodity’s supply
Regarding the issue, Al Kluis of Kluis Advisors has stated, “It was another dry week, last week, across most of Argentina. The hit-and-miss rain pattern continued in Brazil. Watch crop conditions in Argentina. For soybeans, the ratings are 50% good to excellent. This is down 5% from last week and down 3% from last year.”
In December’s WASDE report, the US Department of Agriculture reduced its estimate for soybean production in Argentina by 1 million tonnes. The adjustment resulted from a reduction of the harvested area.
China’s recovering pig herd heightens the demand for soybeans
On Tuesday, an executive at COFCO, which is a state-run grains trader in China, indicated that the country is set to import over 100 million tonnes of soybeans in the current year.
The rising demand for the commodity is due to the increase of its pig herd. The country’s Ministry of Agriculture and Rural Affairs has stated that the pig herd had recovered to over 90% of the normal levels as at the end of November. Agricultural officials expect full recovery within the first half of 2021. Slightly over a year ago, the Middle Kingdom’s pig herd had declined by 40% due to swine fever.
The progress in China’s pig farming has resulted in a higher demand for feeds, an aspect that has translated to higher soybean prices.