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Soybeans Slide on Trade, Pig Virus Worries

January 29, 2019 at 15:45 by Andrew Moran

Soybean futures are slipping on Tuesday as investors are concerned about US-China trade negotiations and the shrinking pig population in the world’s second-largest economy. Soybean prices have stabilized so far this year, despite stalled trade talks between Washington and China.

March soybean futures dipped $0.0475, or 0.51%, to $9.185 per bushel at 14:14 GMT on Tuesday on the Chicago Board of Trade (CBoT). Soybean is on track for an impressive gain in January, advancing just under 3%.

This week, Chinese Vice Premier Liu He and a delegation will be in Washington for high-level trade talks with their US counterparts. Although both sides are at the negotiating table, American officials close to the situation concede that they do not expect an agreement at the end of the meeting because they are “miles and miles” apart.

Beijing has made a couple of concessions, including curbing levies on US cars and buying more agricultural products, but the US is not satisfied with its action on intellectual property and the trade deficit. It was recently reported that China has proposed buying US goods totaling $1 trillion a year until China’s surplus is wiped out. Treasury Secretary Steven Mnuchin was also reportedly recommending lowering tariffs on Chinese goods.

Whatever happens, markets are possibly exhausted from the seesawing media reports.

Meanwhile, as China returns to acquiring US soybeans amid the 90-day trade truce, there is a new concern popping up: the shrinking pig population. To combat the swelling African swine flu virus that has inflicted a considerable number of pigs, authorities are culling hogs to stop the spread of the virus.

This is bad news for American soybean farmers because the world’s biggest importer of soybeans uses the commodity as a high-protein feed for livestock, like cattle, fish, and pigs – there are roughly 400 million hogs that consume soybean meal.

These reports were offset by forecasts that show US soybean exports may benefit from the crop damage in Latin America. According to Oil World, as much as eight million tonnes of soybean crops were damaged from the weather, Argentine crops could be 50 million tonnes below initial estimates. Ultimately, this could shift demand to the US.

South American soybean export supplies will be smaller in calendar year 2019. The United States should benefit and raise exports beyond expectations in March/August 2019.

But part of this impact is going to be neutralised by the likelihood of a downward revision in Chinese soybean imports this season. This year’s South American soybean crop will turn out sharply lower than expected.

In other agricultural commodities, March corn futures fell $0.075, or 0.2%, to $3.79 per pound. March wheat futures plunged $0.0475, or 0.92%, to $5.14 a bushel. March orange juice futures tumbled $0.07, or 0.59%, to $1.17 per pound.

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