Soymeal futures hit limit-up amid Brazil weather woes

13 Nov 2023 | Eduardo Tinti

Soymeal CME futures hit limit-up in late Monday trading, breaching earlier contract highs amid mounting weather concerns in Brazil that compounded upward technical momentum, trade sources told Agricensus.  

Trading limits are imposed on financial exchanges and are triggered when daily price changes surpass a pre-published threshold that imposes an automatic halt on trading activity – a circuit breaker designed to stop huge price volatility.

Front-month December contracts hit the $25/st limit-up threshold during the session before subsiding marginally to trade at $473.6/st by the time of publication.

December, January and March futures also all hit contract highs during the session, as investors absorbed news from Brazil.

Most analysts, traders and brokers Fastmarkets spoke with said support came primarily from weather concerns around Brazil’s soybean crop and from another round of flash soybean sales reported by the US Department of Agriculture (USDA).

On Monday, the Brazilian consultancy Agrural cut its soybean estimates for the country by 1.1 million mt to 163.5 million mt due to adverse weather conditions in Mato Grosso.

At the same time, the USDA reported another 204,000 mt of US beans sold to China.

This brought total flash sales reported since last Monday to an impressive 3.1 million mt, equating to somewhere between 44 to 51 panamax-sized vessels, in a move which reportedly lent further strength to the soymeal market.

However, some trade sources said the sharp upswing seen on Monday in the soymeal market could be overdone, and said that it lacked strong supply and demand fundamentals behind to maintain the move.

“[This was a] funds-driven momentum as the rest of the agriculture market has little to trade on,” Terry Reilly from Marex told Fastmarkets.

“The market is overbought,” he added.

The surge in soymeal futures Monday had a strong bias to the front end of the curve, with December contracts up 5.5% and July 2024 contracts up 3.4% at time of publication.

Since September,. the soymeal market for nearby deliveries has drawn support on the back of strong demand in the US and a lack of spot supply in South America as Argentina struggles with the lack of soybean availability and Brazilian crushing plants are exected to go into scheduled maintenance works.