【Financial Analysis】When will the early listing of Brazilian soybeans hit the market and bean futures will fall?

Xinhua Finance and Economics, Beijing, February 1 (Reporter Ma Yueran) The large number of Brazilian soybeans listed is impacting the global soybean market, and the current overseas market public information shows that the spot price of Brazilian soybeans has been at the bottom in several months. Soybean futures prices in the U.S. and China are falling sharply. In the past month, bean futures at home and abroad have continued to weaken, and although the market rose slightly on January 31, many market participants still maintain the judgment that the market is bearish for bean prices.

According to market analysts, soybean production in four South American countries may increase by more than 20 million tons year-on-year, and previous data show that the global soybean market is not in short supply. With the support of sufficient overall supply, the early listing of Brazilian soybeans quickly impacted the market price, and the rapid decline of U.S. soybeans affected domestic soybean prices. In the short to medium term, market participants are generally bearish on soybean prices, and stronger supply may suppress the market for a long time, and soybean prices may further converge with the cost of soybean planting in the United States.

The launch of Brazilian soybeans hit the price of beans

Market participants pointed out that a large number of Brazilian soybeans were marketed in January this year, significantly earlier than February in most cases in previous years, and the latest progress was earlier than the five-year average.

"The recent sharp decline in soybean and domestic soybean meal prices is mainly due to the impact of Brazilian soybean listings, in the main soybean producing state of Brazil - Mato Grosso soybean sowing ahead of schedule and hot and dry weather to accelerate soybean maturity, this year's Brazilian soybean harvest progress is about 1 week faster than last year. Shi Lihong, chief researcher of oil and oil crops of China Securities Construction Investment Futures, also pointed out that with the progress of the harvest, under the guidance of the experience of the collapse of Brazilian discounts last year, the market has a bearish attitude towards South American discounts, and exporters have shorted more, which has led to an early decline in Brazilian soybean premiums. Brazil's CNF premium for February shipment fell to 30 cents from 155 cents in early January, and CNF for March shipment fell to -10 cents from 90 cents, which significantly drove down the cost of domestic soybean imports.

In terms of the total amount, Shi Lihong pointed out that although the soybean production loss in Brazil's central and western regions in 2023/24 has been clear, and many institutions are also lowering their production estimates for Brazil, the market is expected to increase soybean production by more than 20 million tons year-on-year in Argentina, Paraguay and Uruguay under the better rainfall and crop yields in Argentina, Paraguay and Uruguay.

Lv Aili, a senior analyst at the Beijing Research Institute of Yongan Futures, believes that in fact, from the beginning of planting in Brazil to the Mid-Autumn Festival in November, the market generally maintained the expectation of insufficient rainfall. However, with global oil shortages in 23/24, if weather factors lead to higher production in Argentina and Brazil, the global soybean stock-to-sales ratio of nearly 30% would be the second highest in history.

In the face of Brazil's competitive offers, recent export sales of U.S. beans have also been impacted, and the United States has even imported Brazilian beans with a price difference of more than $2 per bushel between North and South America. According to foreign media reports, on the 26th, as many as three ships of Brazilian soybeans were shipped to a crushing plant on the east coast of the United States, and their transaction prices were much lower than the US Gulf soybean quotation. The price of the three shipments of Brazilian soybeans is at a premium of 135 cents/bu to CBOT March soybean futures.

Shi Lihong pointed out that the export sales of U.S. beans have slowed down significantly in recent weeks, and the current export sales progress has lagged behind the export target of about 2 million tons, which may lead to a downward revision of the export target of U.S. beans in 2023/24. The recent downward spiral between CBOT soybeans and Brazil premiums has contributed to the decline in domestic soybean import costs and the sharp drop in soybean meal.

Wang Zehui, an agricultural product researcher at GF Futures Development Research Center, pointed out that according to USDA data, as of January 18, the United States exported only 16.327 million tons of soybeans to China, a year-on-year decrease of 29.09% from 23.0235 million tons in the same period last year.

In addition, in the context of the recent decline in crude oil and diesel prices, the price of biodiesel (D4) RIN in the United States entered a downward channel, quickly falling below the previous platform of 75-80 cents/US gallon that had been consolidated for nearly 8 months on January 22, and is now down to 52 cents/US gallon. The United States has not recently introduced policies related to incremental firewood, and the policy side may have a tendency to tilt towards new energy, but the previously accumulated firewood production capacity is expected to show a surplus pattern, which further affects the blending ratio of soybean oil and firewood. "The decline in the proportion of soybean oil and raw firewood blending has also become one of the triggers for the decline in the price of soybeans and their products. Wang Zehui said.

Pig breeding and consumption are a drag on soybean meal

At the same time, the domestic pig market occupies an important position in the demand side of soybean meal, but the continuous loss of domestic pig breeding has led to weak demand for soybean meal, which is difficult to support relevant consumption.

Jia Boxin, a researcher at COFCO Futures, pointed out that at the beginning of 2024, the pig market is still in the digestion stage of live inventory and frozen product inventory. In the later period, with the reduction of the supply base, the market's willingness to build a warehouse is expected to pick up.

Jia Boxin said that the pig market as the downstream of the soybean meal market, the most important factor affecting soybean meal is whether the profit of breeding can be repaired. At present, the profit of breeding is still in a state of loss, in the context of the substantial expansion of the group farm and the slow reduction of production capacity, the cycle profit is diluted, and there is still room for fierce games in the future. From the perspective of pig feed composition, through the comparison of protein price varieties, soybean meal is not cost-effective compared with other varieties, in the case of continuous decline in soybean meal prices, the downstream holds a wait-and-see mentality, and the more it falls, the weaker the willingness to purchase.

Shi Lihong also said: "Domestic pig breeding has been losing money for more than a year, and downstream farmers' tolerance for high-priced soybean meal has weakened significantly, which has led to an increase in the substitution of miscellaneous meal in feed formulas and a decline in the proportion of protein added." In addition, under the condition of continuous losses, farmers accelerated the slaughter, and the enthusiasm for replenishment was also inhibited, which further adversely affected the demand for soybean meal. ”

The market believes that the soybean meal market is obviously bearish

"We do not believe that the decline in soybean meal prices is over, because CBOT soybeans and South American premiums have not yet seen an effective stop signal from the supply and demand side, and the domestic soybean import cost is still facing the risk of further decline. Shi Lihong said.

She said that at present, the progress of soybean harvesting in Brazil is only more than 10%, farmers still have a certain reluctance to sell due to low prices, soybean market pressure, storage pressure has not yet come, and domestic soybean crushing plants are still waiting for lower discount prices and profit improvement, the new purchase of Brazilian soybeans is not positive, CNF discount can get insufficient support, is expected to further lower space.

Jia Boxin also believes that the U.S. bean market and South American discounts continue to be under pressure, and the greatest pressure may appear after March. Domestic protein followed the decline of the external market, and may continue to bottom down after falling below the support level.

"Although the Spring Festival is approaching, the terminal demand has improved, but the domestic oil mill soybean and soybean meal inventories are high, which has a certain suppression of short-term prices, but it is also necessary to observe that the overall domestic soybean purchase volume in February and March is relatively small, which may become a short-term bullish. Wang Zehui pointed out that overseas, the current discount in South America is deeper, and if domestic import profits are reopened, it may form a certain support for bean prices.

From an extended perspective, from the perspective of the overall supply pattern, Shi Lihong believes that under the tendency of the 2023/24 export target of US beans to be lowered, the carryover inventory of US beans is expected to approach 300 million bushels, which corresponds to a loose supply pattern. In 2024, U.S. farmers may be more willing to expand soybean planting, which will lead to a further increase in U.S. soybean carryover stocks in 24/25 to a high of around 300 million to 400 million bushels. According to USDA data, the planting cost of U.S. beans in 2023 and 2024 will be around 1,155 cents and 1,118 cents respectively, so there is still room for further downward exploration of the current U.S. bean market price. The medium- and long-term decline in U.S. beans will bring further downward pressure on domestic soybean meal valuations.

Editor: Wang Chunxia

Statement: Xinhua Finance is a national financial information platform undertaken by Xinhua News Agency. In any case, the information published on this platform does not constitute investment advice. If you have any questions, please contact customer service: 400-6123115