Old Crop (futures month, change, settle price)
New Crop (futures month, change, settle price)
Trade continues to be centered on any news regarding trade negotiations with China, which have much further reaching implications than just soybeans or Ag commodities. Thursday saw beans jump up coming out of the overnights on reports that China had sent a written response to U.S. trade demands. Beans were up over a dime on the news without knowing what the Chinese response said. Any kind of communication between the economic juggernauts seems to be a seen as a positive at this point.
Reports through the day Thursday have revealed any real progress towards a resolution is limited. Reuters quoted a Washington source briefed on the Chinese response saying, “They are not close to a favorable deal on trade. Not in the same universe.” Beans are up just a penny and a half Thursday afternoon even with a NOPA report showing record crush for October as well as declining soy oil stocks.
Moves like this one show that the market is ready to latch onto a rally should a favorable resolution be made. However, the IF and WHEN of a resolution being reached are still big question marks. There is still the threat of increased tariffs from the U.S. should the Chinese not show concessions. The Chinese are finding alternatives means of procuring, and reducing their need for soybeans. Two rounds of Market Facilitation Program payments to farmers, as well as a midterm election that showed the Administration does not need to appease rural America, suggest the Administration is in it for the long haul.
Drawn out tensions between the U.S. and China leaves a dismal outlook for U.S. export potential for the 2018/2109 marketing year, especially should a resolution not be met before South American harvest. U.S. soybean sales to China have stopped since tariffs were implemented. This, with a record crop this fall, leaves U.S. stocks extremely burdensome. The latest USDA WASDE report reduced U.S. exports, which resulted in an increase in projected U.S. ending stocks. The latest figures would suggest a whopping stocks to use ratio of 23.3%, which will trend higher should nothing change. Contact your local MAC merchant to develop a plan to market soybeans in the current trade environment.