8 January 2020
- Supply of soybeans on the global market was tight for the best part of Q4-19. This is clearly displayed by the green bars during weeks 36-49 in Figure 1., but this price-supportive trend reversed at the end of December. The current situation is best presented by the divergence between the trend of our proprietary Global soybean spot supply index and the price of soybean. Supply appears high. One of the reasons behind the elevated supply is the release of beans from inventory holdings.
- Our short-term demand assessment for up and mid-stream demand continues to be firm. This is reflected by the spot and forward soybean demand metrics, both of which are now aligned. Our Spot soybean demand index reveals a strong end to 2019, a weak first two weeks of January, followed by a spike in demand during week #5. We also assess the downstream demand in Asia, which underpinned the market rally in Q4-19 as steady.
- Our short-term macroeconomic view has gradually evolved from outright bearish in November and early December to moderately bullish today. On the negative side, credit, and therefore trade finance, has not been flowing as smoothly as it did during weeks #42-50. The result was the soybean price decline during weeks #42-49. Conditions have not changed for the better which is likely to establish a ceiling above any price strength. This view is contradicted by the proprietary Currency Impact Index (CII). It is evident that the ongoing price rally found support in the forex markets.