Soybean Mar '24 (ZSH24)

Description

Soybean is the common name for the annual leguminous plant and its seed. The soybean is a member of the oilseed family and is not considered a grain. The soybean seeds are contained in pods, and are nearly spherical. The seeds are usually light yellow. The seeds contain 20% oil and 40% protein. Soybeans were an ancient food crop in China, Japan, and Korea and were only introduced to the U.S. in the early 1800s. Today, soybeans are the second-largest crop produced in the U.S. behind corn. Soybean production in the U.S. is concentrated in the Midwest and the lower Mississippi Valley. Soybean crops in the U.S. are planted in May or June and are harvested in autumn. Soybean plants usually reach maturity 100-150 days after planting, depending on growing conditions.

Soybeans are used to produce a wide variety of food products. The key value of soybeans lies in the relatively high protein content, which makes it an excellent source of protein without many of the negative factors of animal meat. Popular soy-based food products include whole soybeans (roasted for snacks or used in sauces, stews and soups), soy oil for cooking and baking, soy flour, protein concentrates, isolated soy protein (which contains up to 92% protein), soy milk and baby formula (as an alternative to dairy products), soy yogurt, soy cheese, soy nut butter, soy sprouts, tofu and tofu products (soybean curd), soy sauce (which is produced by a fermentation process), and meat alternatives (hamburgers, breakfast sausage, etc.).

The primary market for soybean futures is at the CME Group. The CME's soybean contract calls for the delivery of 5,000 bushels of No. 2 yellow soybeans (at contract par), No. 1 yellow soybeans (at 6 cents per bushel above the contract price), or No. 3 yellow soybeans (at 6 cents under the contract price). Soybean futures are also traded at exchanges in Brazil, Argentina, China, and Tokyo.

Prices - CME soybean futures prices (Barchart.com symbol ZS) traded sideways to lower into Q2 of 2023 and posted a 2-year low of $12.71 per bushel in May. A decline in soybean demand from China, the world's largest soybean importer, undercut prices as it switched to wheat-based hog feed in an effort to reduce its reliance on soybean imports. Also, China's post-pandemic economic recovery stalled in the first half of 2023, curbing its demand for commodities, including soybeans. Ramped-up soybean production in Brazil, the world's largest soybean producer, weighed on prices after Conab, Brazil's national crop forecasting agency, raised its 2022/23 soybean production estimate in May to a record 155.66 MMT, up +21% yr/yr. In the May WASDE report, the USDA signaled ample global soybean supplies as it projected stronger-than-expected global 2023/24 soybean production and larger-than-expected global 2023/24 soybean ending stocks. Soybeans then reversed and rallied more than $3 a bushel to a 1-1/2 year high of $16.16 per bushel in July. The USDA in June reported in its 2023 acreage report that US farmers planted 83.5 million acres of soybeans, well below estimates of 87.7 million acres and the fewest in 3 years. Soybean prices tumbled into October when they fell to a 2-year low of $12.50 per bushel. Soybean prices fell on ample US soybean supplies and a jump in soybean exports from Brazil. The USDA's Q3 Grain stocks report in September showed U.S soybean stocks as of September 1 at 268 million bushels, above estimates of 244 million bushels. Also, Brazil's September soybean exports soared +60% yr/yr to 6.398 MMT. Soybean prices recovered slightly toward the year's end as dry weather in Brazil threatened its 2023/24 soybean crop as an El Nino weather pattern limited rainfall in its soybean growing areas. Also, the USDA, in the December WASDE report, cut its 2023/24 global soybean production and ending stock estimates. The recovery in soybean prices was limited after Conab forecasted a record 2023/24 Brazil soybean crop of 160.2 MMT in December. Soybean prices finished 2023 down sharply by -14.8% yr/yr at $12.94 per bushel.

Supply - World soybean production during the 2023/24 marketing year (Sep-Aug) is expected to rise by +6.3% yr/yr to a record 398.976 million metric tons. World soybean production has risen sharply from only 80 million metric tons back in the 1980s. The world's largest soybean producers in 2023/24 are expected to be Brazil with 39.4% of world production, the US with 28.4%, Argentina with 12.5%, China with 5.2%, and India with 2.8%.

The US soybean production in 2023/24 is expected to fall by -2.5% yr/yr to 113.344 million metric tons. US farmers are expected to harvest 82.791 million acres of soybeans in 2023/24, down -4.1% yr/yr. The average yield in 2023/24 is expected to rise by +0.6% yr/yr to 49.9 bushels per acre, below the 2016/17 record high of 51.9 bushels per acre. US ending stocks for the 2023/24 marketing year are expected to rise by +6.0% yr/yr to 280.0 million bushels.

Demand - Total US soybean distribution in 2023/24 is expected to fall by -2.9% yr/yr to 4.178 billion bushels. The distribution tables for US soybeans for the 2023/24 marketing year show that 55.0% of US soybean usage will go for crushed oil and meal products, 42.0% for exports, and 3.0% for seed, feed, and residual. The quantity of US soybeans that will go for crushing is expected to rise by +4.0% yr/yr in 2023/24 to 2.300 billion bushels. The world soybean crush in 2023/24 is expected to rise by +4.9% yr/yr to a new record high of 329.396 million metric tons.

Trade - World exports of soybeans in 2023/24 are expected to fall by -0.4% to 170.941 million metric tons. The world's largest soybean exporters in 2023/24 are expected to be Brazil with 58.2% of world exports, the US with 27.9%, Paraguay with 3.7%, and both Argentina and Canada with 2.7%. Brazil's soybean exports have more than doubled in the past decade. US soybean exports in 2022/23 fell by -2.6% yr/yr to 1.995 billion bushels.

World soybean imports in 2023/24 are expected to rise by +2.1% yr/yr to 168.348 million metric tons. The world's largest importers of soybeans in 2023/24 are expected to be China with 60.6% of world imports, the European Union with 8.2%, Mexico with 3.8%, and Thailand with 2.3%. China's imports in 2023/24 are expected to rise by +1.1% yr/yr to 102.000 million metric tons.

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