Soybean prices are heading down the slope again and CBOT September soybean futures are hovering at 824.4 cents a bushel, just about this year’s low in mid-July when China cancelled all of North Dakota food grade soybean orders. According to the soybean price forecast from our in-house commodities analyst, China’s lack of appetite for American soybeans is going to be driving the market down.
The US-China trade dispute is continuing to bite against the backdrop of an expected record high crop this year. Trying to mitigate the fallout of the trade war with China, the US is attempting to protect its farmers by offering to pay $1.65 per bushel on half of their output this year.
Soybean harvest forecasts cut
Some farmers have already begun selling their crop and factoring in the subsidy but mostly the response has been to cut their forecasts for next season’s soybean planting and increase their planned corn planting acreage.
According to the latest planting survey US farmers will reduce their soybean planting acreage by 2.3% to 87.5 million acres in 2019 but increase their corn planting acreage by 2% to 90.8 million acres. Cotton is also going to benefit from reduced soybean plantings and more land will be allotted to this crop.
Lack of China soybean orders will drive prices down
Still this is unlikely to be enough to stem the decline in soybean futures prices given that Beijing cancelled its orders of US soybeans, which were worth some $21 billion in 2017 and were the largest US export to China. Although China’s move is designed to hurt the US, the Asian giant will also struggle to make up for lost imports.
China buys two thirds of the global soybean supply and 80% of its imports came from only three countries: the US, Brazil and Argentina. China is currently substituting this with higher imports from Brazil but this may not be enough. The country imported a total of 95 tonnes last year, 50% more than Brazil’s annual export. Who will blink first remains to be seen.
