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Soybean Tops $9 As Traders Bet on Major Chinese Purchase

March 3, 2020 at 15:25 by Andrew Moran

Soybean futures are trading at six-week highs on Tuesday as they top $9 on bets that China will make a huge purchase of the agricultural commodity. Analysts note, however, that the recent 3% rally can only be sustained if Beijing keeps up with the provisions of the US-China phase-one trade agreement. But experts warn that the global coronavirus pandemic is capping gains.

May soybean futures rose $0.03, or 0.33%, to $9.04 per bushel at 14:05 GMT on Tuesday on the Chicago Board of Trade (CBoT). Over the last month, prices have surged 3.3%, but they are still down more than 5% year-to-date.

According to the US Department of Agriculture (USDA), more than 670,000 tons of domestic soybeans were inspected for shipment in the week ending February 27. This met market expectations. Inspections are an important metric because it can indicate how much the US soybean market is exporting.

Investors continue to anticipate a major purchase by China after the nation agreed to buy more US agriculture as part of a trade deal. While some had expected that Beijing would be given an extension due to the coronavirus that has crippled the world’s second-largest economy, the White House confirmed that China needs to keep up with the provisions of the pact.

The main issue for American farmers is that Chinese importers are still turning to Brazil. They seemingly prefer Brazilian crops due to better prices. In the first three weeks of February, Brazil exported 3.55 million tons of soybeans, up 367% month-on-month. Overall, the world’s largest soy producer could ship nine million tons by the time the official numbers are released.

In Argentina, another chief competitor in the global soybean market, the Ministry of Agriculture suspended the registration of agricultural exports until further notice. Industry observers fear that this could be the first step in another boost to export tariffs.

As global financial markets continue to get hit by coronavirus fears, analysts note that soybean’s gains could be a lot higher if it were not for the uncertainty surrounding Covid-19.

In other agricultural markets, May corn futures climbed $0.05, or 1.33%, to $3.8025 a pound. May wheat futures jumped $0.07, or 1.34%, to $5.305 per bushel. May orange juice futures shed 0.40 cents, or 0.4%, to 99 cents per pound.

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