Global oilseed market: red orange, yellow, green, blue and purple, who holds the color to practice the air dance?

 

Chicago Board of Trade (CBOT) March 2023 soybean futures closed at about $14.
9250/bu on Friday, down 2.
1%
from a week ago.
Spot quotes for the January U.
S.
Gulf Yellow Soybean Schedule averaged $16.
27 per bushel ($597.
8 a tonne), down 1.
50 percent
from a week ago 。 CBOT's March soybean meal was at $477.
60 per short tonne, up 1.
4% from a week ago; March soybean oil futures closed at 63.
17 cents a pound, down 1.
4% from a week ago; Euronext's February rapeseed futures closed at about 577.
75 euros/mt, down 1.
1% from a week ago; ICE Canola for March closed at C$868.
90/mt, up 0.
4% from a week ago; Argentina's upper river soybean FOB spot quotation was $612 per tonne (including 33% export tax), down 0.
5%
from a week ago.

 

The ICE dollar index closed at 103.
646 on Friday, up 0.
37%
from a week ago.

 

(1) Whether the peak interest rate in the United States breaks through 5%

 

Overall CBOT agricultural futures (with the exception of soybean meal) have generally fallen over the past week, in part due to concerns that interest rate hikes led by the Federal Reserve-led central bank will lead to a global recession
.
The Fed raised interest rates seven times in 2022, raising the benchmark rate by 425 basis points, from near zero in March to the range of 4.
25%-4.
5%, the highest rate since the end of 2007 and the most aggressive round of rate
hikes since the 80s.
Fed officials expect to raise the benchmark funds rate above 5 percent this year, and Fed Chairman Jerome Powell has stressed the need to keep rates high for some time, although the Fed also believes it is necessary to slow the pace of rate hikes in 2023 to observe the impact
of rate hikes on the economy.
The Fed raised interest rates by 50 basis points in December, compared to four consecutive 75 basis point
hikes.
Market participants target that the Fed will raise interest rates by 25 basis points twice in a row at the next two policy meetings, bringing the rate to a peak
of around 4.
95% in June.
However, some Fed officials continue to make hawkish rhetoric, such as the January 4 statement by Neil Kashkari, head of the Fed's Minneapolis branch, that the Fed will raise interest rates multiple times, with rates peaking at an estimated 5.
4%.

At present, US inflation has shown signs of declining, but the labor market remains strong
.
The number of U.
S.
first-time jobless claims fell to a four-month low last week, with layoffs down 43 percent in December and 10.
458 million jobs unfilled at the end of November, meaning 1.
74 jobs
for every unemployed person.
The minutes of the Fed's Dec.
13-14 policy meeting, released on Wednesday, also showed that Fed officials believe the labor market remains "very tight.
"
Whether interest rates peak above or below 5%, and for how long, will determine whether the dollar can continue to strengthen
in 2023.
Although from a broader perspective, the competition between China and the United States in the global financial system will determine the long-term trend of the dollar to decline
.

 

(2) Whether China's GDP growth has exceeded 5%

 

After ending the downturn in 2022, China's economy is preparing to adjust amid the shock waves caused by the policy shift at the end of last year, which also brings uncertainty
to the growth prospects of the Chinese economy this year.
As the world's number one importer of commodities, including soybeans, 2023 seems to have given the market more expectations and imagination
.
Some economists are optimistic that China's economy will see a strong recovery
in 2023.
Economists and analysts expect China's economy to grow 4.
7 percent in 2023 and 5 percent in 2024, up from 3.
0 percent in 2022,
according to a Dec.
19 survey by Nikki.
Morgan Stanley was more optimistic, forecasting 5.
4% GDP growth in 2023 in December, up from 5% previously forecast; JPMorgan Chase predicted 4.
3% GDP growth in 2023 on Dec.
15, up from its previous forecast of 4.
0%.

 

Are global geopolitical tensions triggering more use of force?

 

Looking back on 2022, a key factor affecting the global agricultural market is the disruption of agricultural trade logistics and trade disruptions caused by the
Russia-Ukraine conflict.
Looking ahead to 2023, global geopolitical conflicts are still hot spots and crises, and some Western countries may be encouraged by the Russia-Ukraine conflict model to try to escalate provocations on the Taiwan issue, and whether this will eventually evolve into local shipping disruptions or even limited armed conflicts, which in turn will trigger the confrontation between sanctions and counter-sanctions, resulting in serious disruption of global trade flows
.

 

Does Brazil produce more than 150 million tonnes of soybeans?

 

In its December supply and demand report, the USDA forecast Brazil's soybean production in 2022/23 reached 152 million tonnes, a record level and more than 20 percent higher than
last year's drought-induced production cuts.

 

Brazil's National Commodity Supply Company (CONAB) forecast a record 153.
48 million mt of soybean production in 2022/23 on Dec.
8, down about 60,000 mt from its November forecast but up 22.
2% from 2021/22.

In the past week, several analysts have lowered Brazil's soybean production because of unfavorable
weather in the south.
However, even the downgraded production is still above 150 million tonnes
.
If there are no major new weather threats in the coming month, a new high in soybean production is almost a foregone
conclusion.
The increase in production in Brazil will more than offset the decline in Argentina, allowing the global soybean ending stockpile ratio to recover
.

 

(5) Can Chicago soybean futures rise for the fifth consecutive year?

 

In 2022, benchmark Chicago soybean futures rose 13.
80% annually, the fourth consecutive year of gains, reflecting weather-damaged global oilseed supplies and continued growth in demand
。 Can soybean futures rise for the fifth consecutive year in 2023? From the analysis of supply factors, the soybean supply situation at the beginning of 2023 is obviously more favorable than last year, and the drought in southern Brazil at the beginning of last year caused a sharp decline in soybean production by more than 10 million tons, and the weather situation so far this year does not pose any substantial threat to Brazil's soybean production prospects; On the demand side, China is expected to continue its food security strategy, significantly increase domestic oilseed production and reduce dependence on U.
S.
oilseed imports, while the prospect of a global recession and the pandemic in China are likely to add uncertainty
to demand in the coming months.
Spring planting competition (expected growth in U.
S.
soybean acreage) and shifting weather conditions (El Niño weather patterns favoring rainfall in U.
S.
soybean regions) also signal that any increase in soybean prices could come under selling pressure
.
At the beginning of last month, the U.
S.
government weather agency put the chance of La Niña continuing through January-March at 50%, and dropping to 26%
in February-April.

 

While there is no evidence that the first week of the new year can serve as a guide for the full year, holding long positions in all-time highs means that speculative fund bulls on crowded runways may face a stampede, as witnessed in the soybean oil market at the end of last year
.