- Chinese soybean prices tumble. Is this a sign of hopes for trade accord?
It isn’t just US markets which seem to be reacting to ideas of potential China-US trade accord. The hopes that trade talks starting later this week may bring some kind of agreement – and, importantly for US agriculture, end the threat of Chinese tariffs on imports of US soybeans – appear to be causing a reaction in China too. And the opposite one to that in Chicago. If ideas of tariff relief were seen in the last session as fueling a late recovery in Chicago’s soybean market – despite an estimate from Informa that US sowings of the oilseed this year could exceed the US Department of Agriculture by 1.4m acres – on China’s Dalian exchange, prices are weakening as supply fears ease. On Wednesday, Dalian soybean futures for September, the best-traded contract, stood down 1.8% at 3,681 yuan a metric ton in late deals. The contract is now down nearly 11% from an early-April high, made as soybeans emerged on the frontline of Beijing retaliation against tariff threats from US President Donald Trump. Dalian soymeal, meanwhile, for September shed 2.4% to 2,968 yuan a metric ton, taking above 13% its decline from an early-April high, while on the Zhengzhou exchange, rapeseed meal for September stood down 2.7% at 2,440 yuan a metric ton, down 11% from last month’s top. Sure, there are other factors which will have eased Chinese concerns over soybean supplies a little, such as talk of releases from state stockpiles, extra domestic seedings, and a demand slowdown from the pork sector. Terry Reilly at Futures International noted that “China cash crush margins were last running at $0.56 per bushel, compared to $0.66 cents last week”, although the figure remains twice the $0.28-a-bushel level seen a year ago. But the availability of US soybeans, that China really needs to balance its books for the oilseed, looks a bigger influence. By contrast, Dalian corn futures for September stood up 0.3% at 1,767 yuan a metric ton, taking above 2% their gentle recovery so far this month. A different dynamic is driving this trend, with reports that China’s farm ministry has pegged this year’s domestic corn crop at 210m metric tons, well below last year’s 215.8m metric tons. The decline “would be a result of higher subsidies for soybean production and drought in certain parts of the north eastern crop growing areas”, the state Xinhua news agency said, quoting a ministry report.
Despite concerns over potential planting delays for the last ¼ to 1/3 of the crop, profit taking and weakness from Soybean futures was the driving force in the Corn market action on the day. Ethanol production was higher for its 3rd consecutive week coming in at 1/058 million barrels per day. Weather forecasts are calling for beneficial rains for the balance of this weekend and late next week for the Corn Belt. Bad news from the Asian markets along with reports of strong progress for the US planting progress was too much for the Soybean market to bear. Soybean plantings in China are expected to rise significantly for the 2018-19 crop year. Brazilian Soybean export values are currently at a significant discount to US export values. Wheat futures managed to hold support closing at higher prices. The catalyst for its strength stemmed from a lack of moisture in the US, Canada, Russia and Australia.