USDA indicated in its latest Grain Stocks report that the September 1 soybean inventory totaled 523.5 million bushels, below the average forecast of 576 million bushels and also 42.72% below the 913 million bushels last year. U.S. soybean futures on CBOT were bolstered to jump above 1,000 cents after the report released on September 30. Thereafter in its October supply and demand report, USDA pegged the 2020/21 U.S. soybean crop down by 45 million bushels to 4.268 billion as the sown acreage is revised down by 731,000 acres to 83.1 million, raised its forecast of 2020/21 soybean exports by 75 million bushels this month to a record 2.2 billion, and reduced season-ending soybean stocks for 2020/21 by 170 million bushels to 290 million. Lower production of new soybeans and a sharp rise in export forecast thus led to a larger-than-expected reduction in season-ending stocks. These two bullish reports helped U.S. soybean futures to expand gains and even cross 1,070 cents.

In Brazil, local farmers and exporters sold huge amounts of soybeans to China in the first half of this year owing to weak real and as China was buying at a brisk pace. By the end of September, farmers in Mato Grosso, the largest producing state in Brazil, had sold out 99.3% of 2019/20 soybeans, and forward contracted 60.4% of 2020/21 new crops, which was far above the 36% a year earlier. Local crushers in Brazil even had to import soybeans from Uruguay and Paraguay, as soybean supply tightened due to strong export demand. Therefore, the government of Brazil announced that tariff-free imports of soybeans will valid until mid-January 2021, so as to encourage domestic crushers to make imports to satisfy their own demand. The market forecast that Brazil may import 800,000-900,000 tonnes of soybeans ahead of the soybean harvests in January next year.

But dry weather in Brazil is now limiting the progress of soybean planting. As of Oct 15, soybean planting was 7.9% completed in Brazil, compared to 21% a year earlier, to hit the slowest pace in a decade, consultancy AgRural said. Lower supplies of old soybeans and delays in new crop planting in Brazil make U.S. become the largest exporter in global market at present and will to certain extent lengthen the export period of U.S. soybeans. Export data of U.S. soybeans perform robustly as China is ramping up purchases

In the week as of Oct 15, U.S. soybeans inspected for exports totaled 2.1735 mln tonnes, compared to 1.3309 mln tonnes a year earlier and of which some 80.2% was destined to China, according to the weekly export report by USDA. Up to dated, 2020/21 (beginning on Sept 1^st) U.S. soybeans inspected for exports totaled 11,518,836 tonnes, up 77.4% from 6,493,771 tonnes a year earlier. Strong export data have been lending support to U.S. soybean prices.

Fig. 1: Soybean planting in Brazil

Fig. 2: U.S. soybeans inspected for exports

CBOT soybean futures have thus been embracing relatively strong gains recently. Since October, soybean futures have been staying above 1,010 cents. On Oct 19, November soybean contract on CBOT traded at 1054.25 cents, a sharp rise of 61.25 cents or 6.17% from 993 cents on Sept 19.

Fig. 3: U.S soybean price trend

But it is noteworthy that U.S. soybeans are still under the seasonal harvest pressure. As of Oct 18, U.S. soybeans were 75% harvested, compared to 40% last year and 58% average, according to the weekly crop report by USDA. Rapid progress in harvests will continue limiting the upward space of U.S. soybean prices.

Fig. 4: U.S. soybean harvest progress

China will increase its purchases of U.S. soybeans since Brazilian old crops have almost been sold out, so U.S. exports will keep strong ahead of the marketing of new Brazilian soybeans. In addition, Brazilian soybean planting is progressing very slowly, coupled with the forecast of La Nina. Hence, soybean futures on CBOT will likely hit the mark of 1,100 cents. However, there is huge uncertainty in weather conditions. Main soybean producing regions in Brazil are forecast to see rainfalls these days, so local farmers may quickly speed up their planting in weeks. Moreover, 2020/21 Brazilian soybean production is expected to hit a record of 133.7 mln tonnes, according to Conab. Under the combined action of abundant production forecast in Brazil, bumper crops and rapid harvests in the U.S. and severe pandemic across the globe, U.S. soybean prices will be volatile when moving upward.