The soybean market has been under heavy pressure recently, with prices clearly under strain

In December, the global soybean trade side and supply side became hot topics of market attention. On the one hand, the reduction of Argentina's soybean export tariff helps boost its export competitiveness; the export competitiveness of US soybeans is further weakened; China's soybean imports will also reach their annual peak. On the other hand, the USDA December supply and demand report maintained unchanged its expectation of high soybean output for 2015/2016 in the United States, Brazil and other major producing countries, with no sign of easing on the supply side. The author believes that under the dual pressure from the trade side and the supply side, the soybean market has been under heavy pressure recently, and the room for price increases is limited.

Argentina's new tariff policy boosts export competitiveness

Around December, due to the uncertainty brought by Argentina's presidential election, the market had serious doubts about a reduction in Argentina's grain export tariffs. At present, Argentine President Mauricio Macri will sign a decree to cancel export tariffs on corn and wheat, reduce the soybean export tariff from 35% to 30%, and reduce the export tariffs on soybean meal and soybean oil from 32% to 27%.

The author believes that Argentina's policy of lowering grain export tariffs is becoming clearer, and the lower cost of Argentine soybean exports helps boost export competitiveness and increases supply in the soybean trade market. Although the Argentine peso continues to depreciate and farmers may still hold back sales to resist inflationary pressure, the lower export costs and huge inventory pressure also give farmers more incentive to export soybeans.

Continuous declines in exports put pressure on US soybean prices

While Argentina's soybean export competitiveness improves, the export competitiveness of US soybeans is correspondingly weakened, and recent US soybean export sales data have been lackluster. The latest USDA weekly export sales report shows that in the week of December 3, US soybean exports were about 1.629 million tons, down 18.7% from the previous week and down 32% from the same period last year; compared with the same period in the past 8 years, exports in the week of December 3 fell to the 4th highest level for the same period in history. The latest USDA export inspection report shows that as of the week of December 14, US soybean export inspections were 49.581 million bushels (about 1.35 million tons), down 22% from the previous week, declining for 4 consecutive weeks; down about 29% from the same period last year, falling to the 3rd highest level for the same period in history. In short, US soybean exports continued to decline in early and mid-December, which has a bearish impact on US soybean exports for 2015/2016 and puts pressure on US soybean prices.

China will usher in a peak soybean import period in December

The latest customs data from China show that in November China's soybean imports were 7.39 million tons, up about 34% month on month and up about 23% year on year, the highest import volume for the same period in history; from January to November, China's cumulative soybean imports were 72.62 million tons, with increases of 16%, 30% and 38% compared with the previous 3 years respectively, setting a new high for the same period in history. Generally speaking, December each year is the annual peak for soybean imports. During 2010-2014, December soybean imports accounted for about 10.87% of the year's total soybean imports, the highest of the year, so China's soybean imports in December this year are expected to reach another peak.

North American and South American soybean output still expected to remain high

In North America, the USDA December supply and demand report estimates that US soybean production for 2015/2016 will be 3.981 billion bushels (about 108.3 million tons), unchanged from the November estimate, making it basically clear that US soybean production will hit a new record high this year.

In South America, on the one hand, major market institutions estimate Brazil's soybean production at 99.4 million tons to 102.5 million tons, while the USDA report estimates Brazil's soybean production at 100 million tons, both maintaining record-high estimates; on the other hand, as of the week of December 10, Argentina's soybean planting progress was about 68.6%, higher than 54.4% a week earlier and 1.8% higher than the progress in the same period last year. The USDA still maintains a high production estimate of 57 million tons for Argentina's soybean output.

It can thus be seen that the current global soybean supply pressure shows no sign of easing, and the soybean market is under heavy pressure, thereby suppressing the room for soybean price increases.