Daily Management Review

American farmers spur soybean prices


11/14/2018


They are building up stocks in the hope that the escalation of the trade conflict between the United States and China will weaken, opening the Chinese market for them.



Public Domain Pictures
Public Domain Pictures
American farmers, already harvesting soybeans, are in no hurry to sell it, preferring to increase stocks in warehouses. They expect that within a few months the trade conflict between the United States and China will begin to weaken and China will again open its market for American manufacturers.

As a result, there is a growing deficit in the market, which leads to higher prices: at the end of last week, a bushel of soybeans cost $ 8.87, while eight months ago, when the trade war was just beginning, the price was about $ 2.

In this case, farmers are at great risk. Now futures trading indicates price increases for the next year. But the situation may change dramatically depending on trade negotiations and on the volume of deliveries. Moreover, the harvest may deteriorate. Soybean storage conditions are more complex than, for example, corn. The beans quickly absorb moisture, and all stocks of farmers can simply rot, but this does not stop the farmers: they fill the warehouses.

At the same time, soybean production in the USA has already reached record volumes. American manufacturers increased crops, focusing on the Chinese market. China's demand for beans, which were used everywhere, starting with animal feed and ending with cooking, was reassuring to suppliers, and after the start of the trade confrontation between Washington and Beijing, it fell by 90%, and farmers are in for serious losses that they expect to regain, having returned to Chinese market.

Some have no other choice. Millions of bushels of beans simply have nowhere to go: there are very few applications for the purchase of beans. At the same time, according to the information of the American Ministry of Agriculture, by the end of this agricultural year, the reserves will reach about 955 million bushels, and either they will be sold, or they will just have to be thrown out.

However, both suppliers and traders are still hoping for the first option. Contracts for the supply of soybeans in July next year are approximately $ 9.27 per bushel. This gives farmers hope to help out much more in the future, holding stocks now, and traders speculate that Sino-US trade tensions might ease, indicating a possible deal between countries at the G20 meeting in Argentina.

source: bloomberg.com






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