Thanks to this graphic that resume the fluctuation of the price of Soybean for last month, we can observe that since the last bulletin, the price has sharply increased from 30th October to the 1st of November from 847.00 USD per hundred bushels to 887.75 USD per hundred Bushel. (Red circle) It can be explained by a simple reason.
It would be that soybeans start to be planted in Brazil. It means that the resources are scarce in the inventories. Indeed, if we take the seasonality of soybean, we can observe that the harvest for Brazil is done in March. Hence, they are actually selling today their old crop, which should be priced higher than their new crop because the supply is lower.
(High price for scarce resources/ Low price for abundant resources)
From the 1st November to today, the price has actually stabilized. The reason would be that we are actually starting the harvest in the USA. The new crop should be sold at a lower price, which is why the price has actually stabilized since then. The market of soybean is mainly driven by the supply of those two countries and by the huge demand of China.
Finally, the blue circle represents the increased in volume sold from one day to another.
As we can see, the forward curve does not change much within two weeks so we can assume that we need more time to see an evolution in the curve. We can see a carry from November to August and then it slows down from August to September and then we can see another carry until July 2020. The forward curve of soybeans tends to follow a seasonal pattern where we have the notion of old crop and new crop. The new crop period for soybean is in November so that is why we see an upward trend in the forward curve at this time of the year.
Moreover, we have a lot of supply so the price should drop but due to the fact that Brazil is becoming short on soybeans the U.S has a lot of demand coming from China so this could be the reason why the forward price keep following this upward trend.
US farmers refuse to sell their soybeans
Instead of selling their soybean crops right away, American farmers have decided to store their entire production in silos and containers. The reasoning behind this is the hope that the price of the commodity will rise in the coming weeks when government leaders hopefully have reached an agreement and lifted the tariffs barriers. For some farmers, It is not a choice since their only alternative would be to let their crops to rot. By the end of the crop year, the country’s total inventory of soybean would amount to 955 million bushels.
http://marketqview.com/forwardcurvechart.php?ID=74&TYPE=Pricehttps://www.farmfutures.com/soybean/us-farmers-storing-
soybeanshttps://www.thebalance.com/soybean-planting-and-harvest-seasons-809258
https://www.bloomberg.com/opinion/articles/2018-11-13/xi-jinping-not-trump-is-the-true-cold-warrior