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China soy purchase rumors trigger rally

Continued Russian bombing puts Ukraine plantings back under the microscope.

Naomi Blohm, senior market adviser

March 30, 2022

3 Min Read
China flag with soybeans
Getty/iStockphoto

Soybean futures rallied over twenty cents early Wednesday morning ahead of the March 31 Prospective Planting and Quarterly Stocks report. Part of the rally was in response to a technical bounce higher after the market sell-off the day prior when it was announced that Russia and Ukraine would meet again for peace talks. As you know, any hope of peace puts more potential on the Ukraine spring crops getting planted in a timely manner.

On Wednesday morning, however, the hope of peace was met with more bombing action by Russia, which put “war risk” back into the market and allowed for a price rally higher.

In terms of soybean production, Ukraine is not a major global player; however, they are the world’s largest producer of sunflower seeds and sunflower oil. If their sunflower production is down, that means more palm oil and soybean oil will need to be used as substitutes.

But perhaps the bigger reason for the rally on Wednesday morning was linked to rumors circulating within the industry that China Sino grain would potentially soon purchase U.S. soybeans to replace the 3.5 mmt (128 million bushels) recently sold from the Chinese reserve. Let me repeat that: 128 million bushels!

If true, this alone could drop current U.S. soybean 2021-22 ending stocks from 285 million bushels down to 157 million bushels. Also, if this rumor is true, it would help potentially absorb any large soybean acreage announced in the upcoming March 31 Prospective Planting report.

Related:Dig into the latest USDA report

Seasonal soybean futures patterns

Seasonally, when looking at November (new crop) soybean futures, they have a tendency to trade in a sideways pattern during the month of April, with November soybean futures prices then having a tendency to work higher into early to mid-June.

The chart below confirms that notion. During 13 of the last 20 years, the price of November soybean futures traded higher sometime during the second quarter than they did in the first quarter of the year. In looking at the years below, when ending stocks were tight or perceived to be getting tighter this time of year, those are the years where the second-quarter rally had a stronger tendency to occur.

As you know, past performance is not indicative of future results, and with all of the drama surrounding this year’s global grain and oilseed production, anything can happen. Be mindful of your cost of production, and be ready for the market to respond any way that it wants to during this historic year of tight ending stocks in nine U.S. grain and oilseed commodities, inflation, and war.

Related:Prospective Plantings point to 2022 acreage expansion

Nov Soy Price Highs

Reach Naomi Blohm at 800-334-9779, [email protected] or on Twitter (@naomiblohm).

Disclaimer: The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. No representation is being made that scenario planning, strategy or discipline will guarantee success or profits. Any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Total Farm Marketing. Total Farm Marketing and TFM refer to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of National Futures Association. SP Risk Services, LLC is an insurance agency and an equal opportunity provider. Stewart-Peterson Inc. is a publishing company. A customer may have relationships with all three companies. SP Risk Services LLC and Stewart-Peterson Inc. are wholly owned by Stewart-Peterson Group Inc. unless otherwise noted, services referenced are services of Stewart-Peterson Group Inc. Presented for solicitation.

The opinions of the author are not necessarily those of Farm Futures or Farm Progress. 

About the Author

Naomi Blohm

senior market adviser, Total Farm Marketing by Stewart Peterson

Naomi specializes at helping farmers understand how to manage cash marketing needs and understand the importance of managing basis, delivery point considerations, cash flow needs and storage capacity. She earned her Bachelor of Arts in Political Science with a minor in Agriculture Business at the University of Wisconsin in Platteville. She has a Master of Science in Adult Education with an emphasis in Ag Economics from the UW-Platteville and a Master Certificate in Global Education, from the UW-Oshkosh.

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