January 4, 2021
2020 ended on a high note for soybean prices. Contracts soared past the $13 mark, making a memorable ending to 2020. Even though the start to 2021 was a little rocky, as soybeans traded 40 cents off the highs at one point Monday, analysts say there’s still hope for higher prices in the new year.
“We've been looking for that demand driver for about the last seven or eight years; we've now found a short-term driver in Chinese corn demand. We’ll have to see if it continues, but my runway now is probably 18 months to 24 months of more bullishness than I’ve seen probably going back to 2013,” says Dan Basse, president, AgResource Company.
Basse says China is serving as the new demand driver for both corn and soybeans. AgResource Company sees China buying between 25 and 35 million metric tons of corn over the next couple of years.
“Moreover, as I look at the expansion of the Chinese hog herd, they are consuming more soybean meal, which means that in 2021 or 2022, I'm looking at 108 or 110 million metric tons of soybean demand.”
Basse says that added demand, combined with reduced ending stocks, means the soybean market will need to readjust to higher price levels.
“If we lose any of that South American soybean crop, let's say 7 million metric tons, our modeling shows the soybean market may make it up to $14 or $15,” he adds. “So, there's optimism both on the demand front and to some degree South American supply as I look forward.”
Arlan Suderman of StoneX Group says there may be some wiggle room with South American production. He thinks tighter ending stocks mean the market can afford a decent South American crop this year.
“The demand is growing so fast, particularly with the removal of food waste in the Chinese hog industry, as we move forward and rebuild that herd to what we believe will be 80% of pre-ASF (African swine fever) levels.”
Is the same optimism sprouting for corn prices? Basse and Suderman disagree. Watch the full U.S. Farm Report marketing roundtable to see why.