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Soybean futures to outpace grains in 2020, says Rabobank


Soybean futures have scope for headway next year, helped by a recovery in imports by China as its hog herd rebuilds, but grains, especially wheat, will struggle for headway, Rabobank said.


The bank’s annual agricultural commodity outlook, which was in the main more upbeat over soft commodities, did highlight soybeans as a holding potential for gains, ranking the oilseed as having the second most bullish prospects out of 13 ags covered.


Chicago soybean futures will “draw support from a trade truce, as China purchases soy to replenish its African swine fever-lowered hog herd”.


The bank forecast Chicago futures averaging $9.65 a bushel in the last three months of 2020, ahead of the $9.47 ¾ a bushel at which the November 2020 contract was trading on Wednesday.


‘China’s imports to recover fully’

The outlook assumes a trade agreement between China, the top soybean importer, and the US, the second-ranked exporter, later this year – an outcome for which there were “plenty of reasons to be optimistic”, Rabobank said.


“Foremost among them is the economic pressure on both China and the US that is greater than before.”


While the US sees a smaller 2019-20 crop, world soy demand was seen growing by 2%, up from 1% last season, helped by a “nascent feed demand recovery” in China, to 87m tonnes from 82.7m tonnes.


“China’s soybean imports are expected to recover fully back to the pre-trade war record of 94m tonnes by 2020-21,” assuming hog herd rebuilding kicks in.


Although US farmers will next year raise their soybeans sowings dramatically from this year’s dampness reduced number, to 87.5m acres, “South American farm expansion will slow in 2020-21” as Argentina and Brazil lose Chinese orders to the US.


‘Geographic expansion’

For corn, Rabobank forecast Chicago futures averaging $3.98 a bushel in the fourth quarter of next year, close to the level that December 2020 futures are currently factoring in.


Futures will be “well supported in 2019-20, amid short-term US supply tightness, but remain confined toward the high end of the historical five-year range of $3.50-4.00 a bushel due to slowing global demand growth, and the anticipated 2020-21 global acreage and production expansion”.


The bank pegged US corn sowings next year at 91.8m acres, a rise of 1.8m acres year on year, although below forecasts from some other commentators.


Still, it also flagged “ongoing diversification and geographic expansion” of corn output and exports from North America to the likes of the Black Sea, besides South America.


‘Repeat scenario of 2019-20’

Wheat futures, meanwhile, were expected to average $5.15 a bushel in Chicago in the last three months of next year, with Paris futures at E177 a tonne - both estimates below futures curves.


The Paris December 2020 contract was traded at E182.25 a tonne on Wednesday, with its Chicago peer at $5.39 ¾ a bushel.


The 2020-21 season “is likely going to be a repeat scenario of 2019-20 – slowly declining stocks in the US combined with increasing stocks elsewhere”.


Importantly, Russia, the top wheat exporting country, and Ukraine “planted winter grains as planned – and in generally good-to-fair conditions – leaving no reason for us to fear, for now, significant acreage issues for the 2020 wheat crop”.


The bank forecast world wheat stocks ending this season at a record high, “and any price increase will be capped as long as the global corn market doesn’t bring serious price excitement to wheat”.

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