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Soybeans Start 2019 in the Red, Poised for Breakout Amid Trade Truce

January 1, 2019 at 16:54 by Andrew Moran

Soybean futures are starting 2019 in the red, but analysts say the agricultural commodity is poised for a breakout year as US and China inch closer toward a trade resolution. Soybean prices posted double-digit losses in 2018, experiencing much of those losses in the third quarter as retaliatory tariffs were slapped on US products by the world’s second-largest economy.

March soybean futures dipped $0.015, or 0.17%, to $8.94 per bushel at 14:55 GMT on Tuesday on the Chicago Board of Trade (CBoT). Last year, soybean crumbled more than 10%.

US farmers were the victims of President Donald Trump’s trade dispute with China, the biggest buyer of domestic soybeans. After the White House applied levies on billions in Chinese goods, Beijing retaliated with tariffs on American agricultural products, including soybeans. As a result, inventory costs surged, supplies rotted, and many farms went bust, causing the federal government to intervene and extend a $12 billion bailout package to farmers.

While Chinese acquisitions did fall in the second half of 2018, Beijing still imported an admirable amount of shipments. China attempted to reduce its consumption of US soybean by importing more from Brazil and initiating a five-year plan to produce the national staple. Brazil failed at keeping up with demand, prompting Beijing to keep up with US imports.

In the middle of the 90-day trade truce, more than two million tonnes of extra soybean purchases were made before Christmas, increasing total US sales to China to approximately five million tonnes in December. But sources close to trade negotiations suggest that more sales are on the way, making US Department of Agriculture (USDA) Deputy Secretary Steve Censky pleased.

Having a million, million-and-a-half tonnes is great, it’s wonderful, it’s a great step.

But there needs to be a lot more as well, especially if you consider it in a normal, typical year, we’ll be selling 30 to 35 million metric tonnes to China.

The latest developments have not minimized inventory figures as domestic soybean stockpiles are estimated to reach 955 million bushels in 2019, doubling last year’s numbers.

That said, it is hard for commodity traders to determine agricultural export numbers because the partial US government shutdown has postponed the release of daily and weekly reports. This makes it difficult to trade soybean.

In other agricultural commodities, March corn futures dipped $0.0125, or 0.33%, to $3.7425 per pound. March wheat futures shed $0.085, or 1.66%, to $5.03 a bushel. March orange juice futures added $0.02, or 0.16%, to $1.26 a pound.

If you have any questions and comments on the commodities today, use the form below to reply.

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