Exploring the reasons behind the rising soybean prices—will soybeans continue to climb in the future?

This year, soybean prices delivered a pleasant surprise to farmers—prices have actually soared past the 2-yuan mark. Seeing this significant price increase, many farmers who were originally planning to grow corn or other grain crops are now considering switching their land over to soybeans instead. But will growing soybeans really prove more profitable this year? And what’s driving this surge in soybean prices? Let’s dive into an analysis together!

　　There are four main reasons for the rise in soybean prices:

　　First, the state’s official announcement to purchase soybeans directly pushed up the floor price of soybeans. Ultimately, China’s grain prices still hinge on the decisions made by the national players in the market. Recently, news surfaced that state-owned grain reserves would begin purchasing soybeans at a fixed price of 2.1 yuan per kilogram—though this information hasn’t been officially confirmed yet, it quickly spread, causing soybean procurement prices to rise steadily. While we can’t verify the authenticity of this report just yet, given that rumors rarely emerge out of thin air, we’re treating this as a key factor driving soybean prices higher.

　　Second, the pandemic has driven up soybean trading costs. Factors such as disrupted transportation networks and inconsistent government regulations have continuously pushed up soybean transaction expenses—this, in turn, is a major contributor to rising soybean prices. Meanwhile, the recent sharp drop in oil prices has significantly reduced transportation costs, which I believe is also playing a positive role in moderating the upward pressure on soybean prices.

　　Third, the 2019 soybean procurement process was slow, and the increased demand for soybeans in 2020 also became a major factor driving up soybean prices.

　　In 2019, soybean sales in Northeast China were relatively low, with more than half of farmers still holding unsold soybeans. After the outbreak of the pandemic, lockdowns of villages and road restrictions across the region prevented soybean transactions from taking place for an extended period, leading to a temporary supply shortage in the soybean market and ultimately causing soybean prices to surge sharply within a short timeframe.

　　Fourth, the faster-than-expected spread of the pandemic abroad has driven up soybean prices. Back in fiscal year 2019, we analyzed the reasons behind the sluggish soybean market—but at that time, there was no news yet about the outbreak of the "novel pneumonia" epidemic. Even then, our soybean sales were weak primarily due to the influence of lower international soybean prices. Although domestic soybean consumption remained relatively low at the time, expectations for a future increase in demand were still quite high. As a result, soybean traders began pre-purchasing international supplies en masse to mitigate the risks associated with large inventory holdings and to capitalize on anticipated profits from rising global demand in the near term.

　　Due to the ongoing pandemic, timely delivery of internationally sourced soybeans is likely to be severely disrupted. Moreover, the global outbreak continues to worsen in many regions, prompting domestic soybean buyers to adopt temporary, higher-priced measures to replenish their stocks—just in case international shipments fail to arrive as scheduled.

　　Will planting soybeans in 2020 lead to higher profits, given the price increase?

　　Whether soybean prices will remain at their current high levels is a concern for many farmers. We believe soybean prices won’t stay elevated indefinitely, and here are the main reasons why.

　　First, the total supply of soybeans has not decreased. However, due to the pandemic, soybean prices in Europe and North America have plummeted sharply—this is directly linked to the disruptions in global trade caused by the health crisis. Therefore, we believe that once the pandemic eases or when countries fully overcome its impact on global trade and logistics, soybean prices will likely drop sharply, potentially even falling below the current floor price for soybeans.

　　Second, there is a risk that a concentrated release of soybean stocks could shock soybean prices. As we know, the spring supply of soybeans primarily comes from regions like Brazil, where harvesting occurs during this season. These beans then travel long distances by sea before finally reaching China. However, due to the ongoing pandemic, many shipments are now unable to make it to our country, inevitably leading to an overstock situation for soybeans.

　　Experts estimate that the pandemic's impact will persist for about six months—meaning the effects won't fully subside until autumn 2020. Meanwhile, Brazil and the United States are both eager to ship their soybean crops. While a direct "collision" between the two countries' exports is unlikely, a surge in supply over a short period is virtually unavoidable, which will inevitably have a significant impact on soybean prices.

　　The agricultural industry is one where it’s difficult to make big profits through speculation, and those who rely on speculative strategies often end up failing miserably in the farming sector. That’s why farmers should prioritize improving grain yields and enhancing the quality of their crops—after all, strengthening your foundation is the key to staying competitive and secure in agriculture. If we truly want to earn more money from farming, our best path forward lies in focusing on processing and marketing. This is precisely the right direction for farmers to take as we look toward the future.

Statement: Articles published on China Feed Industry Information Network reflect the authors' personal views only. The content is for reference purposes only and does not constitute investment advice. Any actions taken based on this information are at your own risk. If you suspect that a reprinted article infringes your copyright, or if there are inaccuracies in the source attribution, please contact the article editor promptly for correction. Original articles on China Feed Industry Information Network must include proper attribution of both the source and the author when republished. Thank you for your support and understanding!