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Soybeans Rally Despite Doubts on Chinese Demand Amid Swine Fever

March 15, 2019 at 14:52 by Andrew Moran

Soybean futures are rallying as much as 1% to finish the trading week, despite bearish sentiment impacting the US agricultural market. As China continues to deal with the outbreak of African swine fever that has struck a blow to the nation’s pig farming sector, investors have doubts that the world’s second-largest economy will live up to its pledge to purchase more US soybeans.

May soybean futures rose $0.085, or 0.95%, to $9.065 per bush at 14:08 GMT on Friday on the Chicago Board of Trade (CBoT). While flat on the year, soybean prices are on track for an impressive weekly gain of roughly 1.3%. It has been a roller coaster ride for soybean so far this year, trading in the $9.00 to $9.40 range, and then maintaining a descending pattern since the end of February.

Last week, Reuters reported that Chinese state-owned firms purchased at least 500,000 tonnes of US soybeans, with shipments originating mostly from the Pacific Northwest. These were a part of Agriculture Secretary Sonny Perdue’s announcement that Beijing committed to acquiring an extra 10 million tonnes of soybeans, which were made during the February 22 trade deliberations.

According to the General Administration of Customs, Chinese soybean imports were down 17% in February compared to the same time in the previous year.

Traders are beginning to question if China can be able to keep up with its commitment to import more US soybeans. Because the country has been dealing with an outbreak of African swine fever over the past year, it is affecting the pig farming sector. In recent months, there have been 111 confirmed cases of swine fever in 28 of its provinces and regions, resulting in farmers slaughtering approximately one million pigs, which typically consume soy feed. This has diminished overall demand for the agricultural product, despite the 90-day trade truce and pledges from leaders and trade representatives.

Reports show that one component of a new US-China trade agreement consists of Beijing purchasing $30 billion worth of agricultural produce per year.

Commerzbank wrote in a research note:

The trade conflict will certainly be playing an important role because China will no doubt have imported significantly fewer soybeans from the US.

US export figures had already raised doubts about whether China would buy the promised 10 million tons of soybeans in the U.S. These doubts have not been reduced by (February’s export) data from China.

The US government estimated last week that it could take at least three years to eliminate the supply glut, particularly with domestic inventories growing.

In other agricultural commodities, May corn futures added $0.015, or 0.41%, to $3.7175 per pound. May wheat futures tacked on $0.03, or 0.66%, to $4.5575 a bushel. May orange juice futures edged up $0.007, or 0.56%, to $1.25 per pound. March sugar futures rose 0.05 cents, or 0.4%, to 12.41 cents per pound.

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