Soybean Commodity Market Trades, Charts

Soybean prices are surging thanks to ‘stunning’ demand from China

The outlook for soybeans in 2017

China's growing middle class has propped up sales of luxury goods and box-office receipts of Hollywood blockbusters in recent years. Add another beneficiary to the list: Soybeans.

Prices of the oilseed are on a tear this year after a torrid 2015, helped by buoyant demand from the mainland that has exacerbated supply disruptions due to weather uncertainties in Argentina and Brazil, two major producers of the commodity.

Benchmark soybean futures on the Chicago Board of Trade are up 14 percent this year-to-date to 1,009 U.S. cents a bushel and there may be further upside if the dry weather doesn't improve in the next few months, said Ariel Haendler, senior trader at Nidera Group. Prices fell almost 15 percent in 2015.

Even though seed technology has improved yields dramatically, Chinese demand for soybeans is strong.

Dry weather in Brazil is worrying soybean traders, sending prices up amid the backdrop of rising consumption in China as the middle class grows.
Yasuyoshi Chiba | AFP | Getty Images

Haendler expects China to import some 87 million metric tons of soybeans this year, up from 79-80 million tons in 2015.

Some 60 percent of all soybean exports go to China, where it is used in both food and feed for a market that is consuming more meat, he told CNBC's Squawk Box on Wednesday.

"The demand growth has been stunning," said Haendler, who added the growth has been at 5 to 8 percent in the last few years.

The U.S. economy has already benefited from strong growth in soybean exports this year. The world's largest economy is also one of the world's top producer and exporter of the oilseed alongside Argentina and Brazil.

As with other commodities, Haendler expects soybean prices to come under some pressure from a strong dollar going forward.

In the "remote" possibility of a trade war between the U.S. and China amid president-elect Donald Trump's tough talk on trade, U.S. exports like soybeans may face blockades, making exports difficult and sending cash prices in Brazil surging, said Haendler.

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