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Soybeans Rebound Despite US-China Trade Escalation, Benign Weather

August 5, 2019 at 15:48 by Andrew Moran

Soybean futures are modestly rebounding to start the trading week as the fallout from escalating US-China trade tensions and uneventful weather patterns in the US Midwest region appears to be fading. The new tariffs, as well as the inevitable retaliatory measures going to be imposed by Beijing, have weighed on soybean prices in recent sessions. Will the $16 billion bailouts be enough to recoup their losses?

November soybean futures edged up $0.02, or 0.23%, to $8.705 per bushel at 15:42 GMT on Monday on the Chicago Board of Trade (CBoT). Soybean prices recorded a steep 4% loss last week, erasing their year-to-date gains and bringing them into negative territory by 3%.

It has been a rollercoaster ride for US soybeans over the last several trading sessions.

Hours after President Donald Trump announced new 10% tariffs on $300 billion in imports, China confirmed it would respond with “necessary countermeasures.” While no official announcement has been made, it has been reported that Beijing ordered state-run companies to cease purchasing any more US agricultural products.

Analysts prognosticate that the next move for China, which saw its currency slide below a crucial level against the US dollar, is to remove a year-old exemption that a few private US companies received that suspended 25% tariffs on agricultural goods.

Last week, the US Department of Agriculture (USDA) confirmed that a private Chinese firm purchased 68,000 tonnes of soybeans in the week ending July 25. This was the first acquisition since China extended an exemption to the five American crushers from import levies more than a year ago. It was also the first new transaction by the world’s largest soybean consumer since the government announced a 544,000-tonne sale at the end of June.

The USDA’s most recent weekly export sales report shows that China bought 66,800 tonnes of soybeans for 2018–2019 delivery, but it also canceled 72,900 tonnes of previous transactions for the present year. In total, China has purchased 14.3 million tonnes of US soybeans in the 2018–2019 season, the lowest amount in 11 years – four million tonnes that have been bought have still not been shipped.

The White House is attempting to alleviate the damage by handing a bailout to the agricultural industry. The USDA said it will pay between $15 and $150 per care to every American farmer impacted by the trade war. This totals about $16 billion, and it is already anticipated that farmers in the south will receive a greater portion than those in the Midwest.

Agriculture Secretary Sonny Perdue said in a statement:

President Trump has a great affection for America’s farmers and ranchers and it’s pretty evident in this program. He knows that they are fighting the fight and they are on the front line.

Overall, the market has conceded defeat on behalf of soybeans. According to the US Commodity Futures Trading Commission (CFTC), hedge funds and money managers boosted their net short positions in soybeans.

In other agricultural commodities, August corn futures rose $0.06, or 1.47%, to $4.155 per pound. September wheat futures were flat at $4.9025 a bushel. September orange juice futures dropped $0.013, or 1.31%, to $0.979 per pound.

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