Lower oil prices and favorable planting weather in Brazil are putting pressure on soybean prices

Soybean and oil quotes remain quite volatile amid a downgrade in the U.S. soybean crop forecast and favorable planting conditions in Brazil. However, the acceleration of the recession of the world economy may reduce the demand for products, especially given the high level of prices.

Last week on the Chicago Stock Exchange, November soybean futures fell 1.7% to $523.9/t, while soybean oil fell 3.8% to $1,405/t, losing 2.4% for the month and 5% respectively and returning to the “pre-war” level. Traders reduced the number of contracts for soybeans and soybean products during the week, not counting on price increases in the near future.

Despite the escalation of the war on the part of the Russian Federation, global oil prices have accelerated their decline in anticipation of the eighth package of sanctions against Russia, in which the EU may limit the price of Russian oil and disconnect from SWIFT Gazprombank, which is now the main source of foreign currency income for the Russian Federation.

November Brent oil futures for the week fell by 6% to an 8-month low of $86/barrel.

The growth of the dollar against other world currencies to a 20-year high increases the pressure on energy prices. Additionally, they are pressured by the decline in demand for gasoline in the US over the past 4 weeks to the lowest level since 1997, and for diesel fuel to the lowest level since 2020.

According to Flightradar24, the number of flights for the month fell by 5.4% and is 16% below the level of the same period in 2019, which preceded the pandemic, so the demand for aviation fuel is decreasing. However, some easing of quarantine restrictions in China could boost economic activity and demand for oil and agricultural products from the Greater China side.

Protests in Iran, in which more than 30 people have died, have worsened the prospects for a nuclear deal that could increase the supply of oil to the world market.

Heavy rains in the south and in the center of Brazil replenish soil moisture reserves, which will allow sowing of soybeans and corn, the areas of which are planned to be expanded, to start at the optimal time. Rains will continue next week, improving the outlook for the country’s soybean crop and easing traders’ concerns about the fate of the upcoming crop.