One often traded agricultural commodity is soybean, which has applications in various end markets, from food to animal feed. The steadily expanding soybean sector has been aided by rising modern consumer demand for protein-rich diets.
The crop year 2022–2023 is estimated to see a 6% rise in the world soybean supply. Currently, crop production for 2021-2022 is 4 percent lower than soybean production for 2020-2021. However, it is projected to increase by 10% in 2022–2023.
In addition, the export demand for soybeans in regional markets has increased in the last few years in locations like the U.S., Brazil, Australia, Argentina, and China. Consumption of soybeans increased in the U.S. at a CAGR of 2.5% and is anticipated to rise by 4% in 2021–2022 compared to last year. The primary use of soybeans in the U.S. is to extract meals and oil. While in Brazil, it increased at a CAGR of 1.6%.
Demand in Australia has grown over the last few years at a CAGR of 7% and 4% in China as compared to the previous year.
Brazil and Argentina have taken over as the top producers of soybeans. Previously, it was the United States. The US-China trade dispute is the leading cause of Brazil’s increasing exports to China. Brazilian soybean exports have improved as a result of rising feedstock demand.
Soybean Prices have seen linear growth due to factors like unfavorable weather conditions, demand from import markets, and tightening global supplies. The supply-demand gap is expected to persist as long as there is an increase in demand for oil seeds.
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Suppliers mostly use CBOT futures to establish soybean pricing and contract terms. Depending on the destination, the basis and freight expenses are added to the CBOT pricing. Typically, the basis is determined by the difference between the prices of cash and futures.
The timing of purchases and sales, which is influenced by the crop year’s supply-demand scenario, determines the profit margin. Additionally, major soy-producing regions have started producing again at average rates. However, given that port security precautions are still in place, shipment delays are probably possible.
Some geographical factors have also contributed to the pricing of soybean and its demand. For instance, El Nino, weather conditions benefit the main soybean-producing regions (the U.S. and South America) because this season will see a good amount of rainfall, but La Lina will result in a decrease in acreage and yield because of a drop in rainfall and persistently dry weather.
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