Soybean Prices Explained
Soybean prices extended their cooling value as excess supply of old-crop soybeans fattened the inventory. Additionally, improved weather conditions in Brazil ( the largest exporter of this commodity ) lessened concerns about crop losses.
Why are soybean prices fluctuating?
Generally, the prices of other grains such as corn and wheat highly impact the soybean market value. However, economic and trade factors also get a hand. Here is a detailed explanation of how these factors affect soybean prices:
1. Weather Conditions
The successive droughts in the U.S. put a massive delay in American agricultural production. Additionally, the widespread effect of El Niño, particularly in Latin American countries will highly affect crop yields.
Thus, this put commodity prices rising and soybean is not an exception.
2. Global Demand
The growing global demand for soybeans makes its price high in the market. Major importers such as Japan and the European Union and the increasing Chinese demand push its price upward.
3. Ethanol Price
Corn is the key ingredient in making ethanol. However, soybeans are used as feedstock too. Therefore, an increase or decrease in ethanol demand and price directly affects both commodities’ prices.
4. U.S. Dollar
The U.S. is the number one soybean producer and most commodities are traded in its currency. Thus, soybean prices come after dollar fluctuation. A strong dollar means a decrease in soybean prices. Conversely, a weak dollar means an increase in its prices.
5. Alternative Oils
Soybean oil competes with other oils such as rapeseed oil, castor oil, cottonseed oil, and almond oil. Supply, demand, and price changes in any of these oils can ultimately affect each other’s value.
Which variables impact the price of soybean?
- Weather Conditions
- Global Demand
- Ethanol Price
- US Dollar
- Alternative Oils
- Oil Prices
- Currency Fluctuations
- Trade Policies
Where does soybean come from?
Generally known as a ”miracle crop” in the US because of its versatility in different climates, soybean originated in China in the 11th century B.C.
Soybean cultivation in America became possible in 1765 because of Samuel Bowen, a farmer. Bowen made it possible to grow soybeans in Savannah, Georgia and this culminated in the spread and massive cultivation of this plant across the state.
Additionally, soybean proved their flexible usage in many ways:
1. During the Civil War, soldiers used soybeans as a coffee alternative.
2. During the Great Depression, it became an important staple in the American diet.
Top Applications of Soybean
This commodity largely serves two industries, the food and industrial sectors. Soybean is a versatile food ingredient that is used in a variety of products:
1. Soy milk: Soy milk is a dairy-free alternative to cow’s milk made from soybeans. Additionally, it is a good source of protein, calcium, and vitamin D.
2. Tofu: It is a hardened soy product similar to cheese in texture and consistency. Tofu is a good source of protein and iron.
3. Tempeh: It is a fermented soy product made from whole soybeans. Additionally, it has protein, fiber, and probiotics.
4. Edamame: Edamame is an immature soybean that is boiled or steamed in the pod.
5. Soybean oil: Soybean oil is a vegetable oil that is extracted from soybeans. It is a good source of essential fatty acids.
6. Feed: Soybean meal is a high-protein feed ingredient made from the byproducts of soybean oil production. Soybean meal is used in animal feeds such as poultry feed, swine feed, and cattle feed.
Soybean oil is used in numerous industrial applications, such as:
7. Biodiesel: Soybean oil can be converted into biodiesel, a renewable fuel used to power vehicles.
8. Soy ink: Soybean oil is important in the production of soy ink, a type of ink that is made from renewable resources.
Today, soybeans produce comes from its top exporters with the U.S. claiming the top spot with its yearly 120.1 million metric tons of production. Brazil, Argentina, India, and China follow distantly.
What is the future price of soybeans?
While soybean oil prices started 2024 with a bearish market, investors are hopeful of its comeback in the next quarter as the global demand for alternative energy sources will boost its prices.
Additionally, the hotter weather systems due to El Niño will further lessen soybean production, leading to another price spike.
However, the decreasing number of Chinese hogs and the country’s slowing economy will also dampen soybean demand as prices. China’s average Brazilian soybean imports account for 65% and 25% of the American commodity.
Overall, the future price of soybeans in 2030 is expected to be significantly higher than today’s prices. Its top price movers are global economic growth, population growth, rising incomes, climate change, and supply constraints.
Thus, experts believe that soybean prices will reach $15 per bushel by 2030.