30 September 2020
- Supply continues to increase for the 3rd consecutive week, which is not related to any new US crop considerations and it is formed by shifts along the global supply chain for beans. Such strong negative divergence between supply and price cannot be sustainable as the price will always be expected to follow its fundamentals and reverse in the direction of supply. This statement is of course valid in the case of demand not able to offset the supply shock.
- Our spot demand view (2-3 weeks out) remains firmly bullish. The reversal in demand, which occurred during weeks #30-35, is the sharpest swing in demand experienced by the model so far this year. Please refer to the Chart of the Week for further details. The prospects for demand only appear supportive in the very short-term, as the data continues to suggest that weakness is forming for late October.
- As suggested in our previous publication the macroeconomic environment remains supportive of the soybean price thanks to better Asian and European macro data in July and August. Early indicators for September and October point in the same direction. This surge in demand continues to be driven by stronger credit creation and stronger credit velocity. The critical mass of market participants appears to agree with this statement, as the speculative net long positions kept increasing throughout the period