The plant is in demand on the world market like seldom before. By Emmeran Eder, Euro am Sonntag
The price of soybeans has risen to a six-year high. Globally, around four fifths of production is processed into animal feed. That is also the reason for the bull market since June 2020. Since then, the price per bushel has climbed from 8.50 to 14.30 US dollars.
Because China is buying almost the entire world market empty, as it replenishes its pig stocks after the swine flu has decimated them. In mid-2021, as many of the animals are likely to be in the stables there as before the outbreak of the epidemic. In order to satisfy the hunger of the middle class for meat, China relies heavily on soy imports as animal feed.
More than 80 percent of global exports come from Brazil and the United States. Because of the trade dispute with the USA, China was recently only able to buy soybeans there to a limited extent and therefore switched to Brazil and Argentina. This made the country on the Sugar Loaf with a 54 percent share of the world’s top exporter and even overtook the USA.
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This has ramifications for Brazil itself. As it exports soy in bulk, the plant is scarce at home. One consequence is more imports from Paraguay and Argentina, the markets there have been swept clean. Brazil, as one of the largest meat producers in the world, also needs a lot of animal feed.
In addition, the soy growers in the state, where the harvest for 2021 begins in February, already sold around 80 percent of it in advance to China in August 2020, which is common. The price rally that followed caught them off guard. Cayron Giacomelli, large farmer in the main growing area of Mato Grosso in central Brazil, told the Reuters news agency: “Nobody could imagine that the soy price would reach such dimensions.”
Since the pre-sales are without a promise of guarantee and there are also no advance payments, the planters at the Sugar Loaf are now trying to renegotiate. This also drives up prices on the stock exchanges.
In addition, in Brazil and Argentina, where peak harvests were expected for 2021, the positive estimates will soon have to be reduced somewhat due to the persistent drought.
It is also uncertain whether the trade agreement inherited from his predecessor Donald Trump on the purchase of fixed quantities of soy in the USA by the Chinese will remain valid or will be renegotiated when the new US President Joe Biden takes office.
This conglomeration of various factors and an increasing number of speculators in the futures markets jumping on the rally should further fuel the price. Investors can participate with an ETC on soybeans from WisdomTree (ISIN: DE 000 A0K RJ7 7). The annual fee is 0.49 percent.