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Soybeans Slide As Commodity Still Cannot Benefit From US-China Trade Pact

January 21, 2020 at 14:57 by Andrew Moran

Soybean futures are sliding again on Tuesday, extending their losses despite the US and China signing the first phase of a comprehensive trade agreement. Soybeans prices have failed to log any meaningful games, slumping to one-month lows. Can the agricultural commodity reverse course?

Soybean futures fell $0.0825, or 0.89%, to $9.215 per bushel at 13:42 GMT on Tuesday on the Chicago Board of Trade (CBoT). Soybean is down 2% over the last five trading sessions, adding to its year-to-date loss of nearly 4%.

Last week, the US and China signed phase one of their trade deal. A key provision in the pact includes Beijing buying $200 billion in American goods, including $50 billion in US agriculture. It is unclear how much soybean the top consumer will buy, but some analysts are skeptical that the world’s second-largest economy could raise its agricultural imports by as much as 230% over the next two years.

As a result, investors are waiting for concrete evidence of China increasing its imports of not only Soybean but also corn and wheat. There had been reports that Chinese buyers were beginning to order US cargoes but US grain elevators were not confirmed by either US exporters or Chinese importers. A Rabobank report says that China will meet as much as 60% of its pledge.

Prices took a further hit on Brazil beginning the harvest of a record amount of soybeans. Due to the new supplies entering the market soon, the Brazilian soybean crop is weighing on markets. So, without significant buying, soybean futures could slump below $9.

The US Department of Agriculture (USDA) is forecasting that global consumption of “soybeans will outpace production this year, which may further indicate that a floor on prices is near.”

Moreover, the smart money is going long on most US agricultural commodities. According to the Commodity Futures Trading Commission (CFTC), hedge funds and money managers have lifted their net long positions for soybeans, wheat, and meat, though corn has remained flat.

In other agricultural markets, March corn futures shed $0.0325, or 0.83%, to $3.86 per pound. March wheat futures picked up $0.015, or 0.26%, to $5.72 a bushel. February coffee futures dipped $0.0125, or 1.11%, to $1.109 a pound.

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