• The sharp drop in US soybean futures was attributed to increased expectations of rains in the northwestern parts of the US Midwest. 
  • USDA’s earlier projection was cut by more than 10 million metric tons for corn production while production of soybeans was reduced by 1.8 million metric tons. 
  • China increased its soybean demand from the US while reducing the commodity’s import from Brazil.

US soybean futures lost 2.30% on August 19, 2021, closing at $1,320.88.  It traded from a high of $1,352.25 to a low of $1,314.38. The sharp drop was attributed to expectations of rains in the northwestern parts of the US Midwest. Further, there was an increase among net sellers of soybeans (and commodity fund managers) at -5,000, while net buyers of corn stood at +1,000.

Soybean futures on the Chicago Board of Trade (CBOT) retracted from the 4-day highs realized on Monday to close at $1,355.40 (-29.6%). The increase took place after the US Department of Agriculture (USDA) lowered its projected yield for both soybeans and corn in 2021.

USDA’s earlier projection was cut by more than 10 million metric tons for corn production, while production of soybeans was reduced by 1.8 million metric tons. This decrease was due to the drought situation in the US. 

1- Prices of soybeans futures per bushel

Prices of corn futures per bushel since August 13, 2021, have receded from $5.77 to $5.51 by August 19, 2021. The cost of soybean futures has decreased from $13.52 to $13.30 in the same period. 

2-Wheat futures per bushel

On their part, wheat futures have declined 3.54% per bushel from $7.62 on August 13, 2021, to $7.35 on August 18, 2021. 

Commodity demand

In the week leading to August 12, 2021, net export sales of soybean soared above expectations in the market, with up to 2.14 million mt sold. The 2021/22 delivery rose after China bought 19 cargoes of the commodity. 

Private soybean sales to China amounted to 131,000 tons from the US, as confirmed by the USDA. The US has had fresh sales of soybeans since August 5, 2021.

However, China decreased its soybean import from Brazil in July 2021. Despite being the world’s top soybean consumer, China reduced its Brazilian imports by 3.7% in July 2021 (YoY) to 7.88 million tons from a high of 8.18 million tons in 2020. 

The decline in demand was attributed to a reduction in Chinese crush margins. According to Reuters, crushers in Shandong Province, the main soybean processing joint in northern China, were to lose 176 yuan ($27.07) while crushing each ton.  

As of 5:03 am GMT on August 20, 2021, the November 2021 contract of US soybean futures was up 0.70% from the previous day’s close. It traded at $1,329.50, indicating an increase in demand. 

Technical analysis

Soybean futures traded in the range of $1320 (as the floor) and $1329, as the break before the upper ceiling in the short-term at $1483.20. 

3- Technical analysis chart for soybean futures.

With the 9-day EMA trading at 1348.40, the price may break the trading range and move lower. It may seek to open a new pathway towards $1208.20 and a deeper correction to $1030.40 (November 2020 lows). 

We still think that in the near term, prices of soybean futures may move upwards, with 1483.20 acting as the barrier before moving to 1657.00. 

However, a downward breakout is still needed to confirm price movement towards 1208.20. Demand plays a crucial role in activating this downtrend.

The 14-day RSI points to the increased selling pressure at 37.33 (approaching the oversold region). ATR shows a slight pause in the volatility decline at 35.5.