Soybean futures achieved a fourth successive year of gains in 2022, a feat not achieved since the 1970s.
A somewhat disappointing US harvest, following a drought-reduced Brazilian one earlier in the year, supported prices amid some mixed demand dynamics.
While hopes for US biodiesel demand continue to cheer soyoil bulls, soymeal markets faced the uncertainty of China’s Covid-fuelled economic slowdown.
Will 2023 see a fifth successive year of gains? Leading commentators give their views below.
Goldman Sachs
So far in the 2022-23 marketing year China has remained active in the soybean market, with 15m tonnes of accumulated exports, in line with last year’s level. While hog prices have softened slightly onshore, hog margins remain positive and feed demand robust into 2023.
With stretched positioning and an earlier softening effect from Brazilian export competition, we prefer corn to soy going into US planting in 2023, making it one of our top trades for the marketing year.
However, with [soybean] inventories so low going into 2022-23, a strong start to US exports and growing risks to Argentina’s soybean crop, a return to stockout levels in US soybeans is possible by April-May.
Should US fundamentals tighten further, going long old-crop (May 2023) to new crop (Nov 2023) soybean spreads offer leveraged upside.
On balance, we expect soybean prices of $15.00, $15.85 and $14.75 per bushel on the three, six, 12 month horizon.
Rabobank
Rabobank sees Chicago soy falling… to $13.10 per bushel by the fourth quarter of 2023, as last year’s dynamics are reversed.
A major South American relief valve (supply up 36m tonnes, or 20%) a strong dollar and logistics-curbed US export prospects will offset healthy crush growth and soften the landing for grounded US soy stockpiles.
Chicago soy tightness should ease further into 2024. While the soy/corn ratio will remain historically compressed, soy will retain a natural advantage versus corn from a rotation and nitrogen-fixing perspective.
Chicago soy prices will fall steadily in the second half of 2023 due to the US recession and as harvest pressures suppliers. Even so, falling farmer margins leave them delayed and increasingly reticent sellers below $13.00 a bushel.
GrainPriceNews view
Soybean futures, having plunged by 18.5% in June, staged a recovery over the rest of 2022, to record a fourth successive annual gain.
And it was warranted too, what with US production proving disappointing, yet US exports making a strong start to 2022-23.
The 56.0m tonnes in US soybean export commitments for this season, as of the run up to Christmas, is bigger than for any marketing year bar 2020-21 and 2016-17 – both of which ended up with shipments markedly bigger than the 55.7m tonnes which the USDA foresees for 2022-23.
That gives bulls some hope that soybean prices will not fall too far over the next few months, even as supplies from what is expected to be a strong Brazilian harvest come onstream into the export market.
Another comfort comes from expectations, thus far, that US farmers will not splurge on soybean sowings for 2023. The USDA in November forecast plantings of 87m acres, down by 500,000 acres year on year, with corn seen picking up area.
The ratio of new crop soybean to corn futures prices, at 2.32 as of the end of December, was pretty much in line with the figure a year ago, meaning little in the way of a signal from the revenue line.
That said, fertilizer prices also need to be added to the mix. If these keep falling, this would support margins for growing corn, a nutrient-hungry crop, more than soybeans, which fix at least part of their own nitrogen from the atmosphere.
Also to put into the mix is Chinese demand – a dynamic which might not appear to be so supportive, given the Covid dent to the country’s economic growth prospects.
Still, Chinese crush margins have improved with a recovery in the hog herd and, on a smaller scale, signs are from milk markets that the country’s dairy herd is expanding solidly too.
