Soybeans Slump to Lowest in a Decade as Trade War Intensifies

(Bloomberg) -- Soybean futures fell to the lowest level in a decade as an escalating trade war between the U.S. and China dimmed hopes that the Asian nation will resume purchases of American beans and ease a supply glut.

Farm commodities from pork to cotton slumped on Monday, with soybeans dipping below $8 a bushel for the first time since 2008, after China said it will raise tariffs on some U.S. goods starting June 1. Beans for delivery in July pared losses to finish at $8.025 a bushel after President Donald Trump said he’ll meet with China’s Xi Jinping at the Group of 20 summit in Japan in June.

Flaring trade tensions between the U.S. and China, the world’s top importer, have roiled the outlook for soybean demand as American farmers sow the next crop. China bought several rounds of soybeans earlier this year as goodwill gestures in the trade talks.

“Clearly, there’s uncertainty about where we’re going from here,” said St. Louis-based independent analyst Ken Morrison. “Both parties have backed themselves into a corner.’’

The breakdown in negotiations also makes it more likely that some purchases of U.S. goods such as soy and pork might be canceled before delivery, Morrison said. China has purchased about 7.4 million metric tons of U.S. beans that have not yet been shipped, according to U.S. Department of Agriculture data.

Soybeans Slump to Lowest in a Decade as Trade War Intensifies

The latest negotiations between the two countries ended without a resolution, prompting U.S. President Donald Trump last week to pledge American crop purchases to offset the slower sales to China. Still, it’s unclear how far that would go to solve the current supply overhang.

The conflict comes as African swine fever plagues hog producers in China and nearby countries, with pig losses in Vietnam now totaling about 4% of its domestic herd. The spreading fever may further curb demand for soybeans and other livestock feeds.

American farmers are struggling as the tariff spat that started a year ago curbed soybean exports, sending prices tumbling and hurting grower incomes. The escalation in tensions dashes hopes of a quick deal and puts the focus back on well-supplied markets.

On Friday, the U.S. Department of Agriculture released its closely watched monthly crop outlook, forecasting rising domestic stockpiles in its first guidance for the upcoming season.

“The USDA report has been quite bearish last Friday and has added to the gloomy atmosphere in place on agricultural commodities due to the endless and tense trade discussions between USA and China,” Paris-based farm adviser Agritel said in a note.

Soybeans Slump to Lowest in a Decade as Trade War Intensifies
Oilseed prices
  • Soybean futures for July delivery fell as much as 2.3% to $7.91 a bushel on Chicago Board of Trade
    • That’s lowest for most-active contract since late 2008
    • Prices are down ~10% so far this year
  • Soybean meal unchanged at $287.30 per 2,000 lbs
Grain markets
  • Wheat futures for July delivery +2.9% to $4.37 a bushel on CBOT
  • Corn futures up +1.4% to climb for first time in four sessions

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