Soybean ETF Activity Spikes as Traders Ready for High Chinese Demand

As many investors were concerned about how ongoing risks could affect the equity market, a soybean-focused ETF has been attracting greater attention on recovering global demand, notably from China.

“We have had unusually large inflows into the SOYB fund the past two days – its largest volume day was yesterday and fund AUM is now also a record,” Sal Gilbertie, CEO, Teucrium, told ETF Trends.

The Teucrium Soybean Fund (NYSEArca: SOYB) saw trading activity surge over the past two days, with volumes spiking to about 600,000 on Tuesday. In contrast, SOYB volumes were still at an elevated 130,900 on Thursday, compared to its daily average of 61,500, according to Morningstar data.

The sudden interest in SOYB has helped the ETF attract greater inflows, and it now has $32.8 million in assets under management, or up roughly 38% month to date, according to Teucrium

Gilbertie argued that a combination of factors has created renewed interest in soybeans over the past few days. Most importantly, U.S. soybeans are now competitive in the world markets after the South American harvest and sales season wraps up, especially in Brazil.

Furthermore, Chinese buyers have returned to U.S. farm markets. China has purchased cargoes of soybeans almost every day for the past week or so, renewing hopes for the entire agriculture sector that the world’s largest consumer of soy has returned to U.S. farms for good.

China still needs to restock its stores of grains after the trade war depleted stockpiles. Furthermore, the Chinese government announced that their culled swine herd expanded again for the eighth consecutive month, which confirms that China’s demand for soybeans as animal feed will also continue to grow – the emerging country has drastically cut down its herd in response to the recent African swine flu that swept through the country.

“The USDA is projecting that China will import a record amount of soybeans in the coming crop year, which means they will have no choice but to continue buying US soybeans because the rest of the soybean exporting world combined does not have enough soybeans to meet Chinese demand,” Gilbertie added.

In the meantime, the soybean balance sheet is the tightest among the big grains. Looking ahead on U.S. supply, the current dry forecasts for the Midwest, while not yet of any real concern, are making some analysts think twice about what could happen to soybean supplies if the weather stays dry too long.

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