In Argentina’s case, farmers have stockpiled and are not selling their record soybean crop, not least because of a 35 percent export tax. In turn, the U.S. has taken advantage of the situation in Argentina to export more soybean meal.
In China, it is perhaps a different story, one that revolves around just what level of soybean stocks the government sees as desirable. As Carl Zulauf of the Department of Agricultural and Consumer Economics, University of Illinois Urbana-Champaign points out in his excellent paper, “Some Key Trends in the World Soybean Market,” admittedly, it is a very different market: “China is currently projected to hold 59 percent of ending 2014 world cotton stocks and its cotton stocks equal 184 percent of its projected use of cotton.” One has to wonder just where it is going with soybeans.
(Over and above the fact that considerable soybean stocks may remain at the end of each year, it is vitally important to understand—in contrast with some of the other commodity markets, for example copper—just how rapidly and the degree to which, especially in the soybean market, supply and demand dynamics can change. Why? One of the reasons is simple: There are two growing seasons—one in the northern hemisphere and one in the southern.)
Market Getting More Complex
Aside from such country-level political considerations, the market has become increasingly complex over the years, not least because of the increase in information (varying in both timeliness and quality) now available.
In a recent article in the Ohio Country Journal titled “Soybean price outlook challenging in a complex world market,” Warren Feather, merchandising manager of Cargill’s soybean processing and soybean export business in North America, illustrates this increasing complexity nicely. He says that, not too long ago, “… the markets watched weather in the Corn Belt, European bean and meal imports, Russian grain and meal purchases, government programs, USDA reports, and commercial information positions.”
He seems to remember that, when he started, he didn’t even have a computer. But now he says he has three computer screens on his desk and watches “…weather in South America, India and China, Chinese imports, animal diseases, hedge fund activity, Brazilian currency, worldwide farmer selling and retention, livestock profitability, biofuel mandates, other commodity markets like crude oil, and consumer trends like non-GMO.”