Soybean futures are the lowest they have been since 2008. Soybean producers have been hoping for a rally since before trade negotiations. Unfortunately, it seems as though growers have continued to absorb blow after blow.
No Magic Left
Producers have been hoping for a rally since before the China tariffs were imposed.
Indeed, the aftermath of the first weeks of the trade war shows beans’ hand a bust, with no magic to stop the steady drop in prices.
The hope is for trade negotiations to lead to a breakthrough, ending the dispute with China. However, soybean prices have reached their lowest point since 2008. This means producers have a long way to go to see profitability again.
USDA’s July 12 monthly report put a number on the lost revenue farmers face: $325 million in new crop sales. That number is based on the amount the agency lowered its price range for crop, 75 cents a bushel. The July report featured USDA’s first attempt to quantify what the tariffs mean for U.S. exports, and it’s not pretty.
Lower and Lower
Soybean prices continue to fall lower and lower. The soybean market is down -$2.25 cents from the highs posted at the end of May.
The funds have gone from being aggressively long, to now short between 50,000 and 60,000 contracts, pushing prices to their lowest level in the past decade.
The weather in the U.S has been exceptional. In fact, many are anticipating a record setting crop. Still, the real issue in prices lies in the trade disputes with China. Hope remains that China and the U.S. can reach a compromise, but producers are not holding their breath.
The questions is, can the Chinese economy and market hold out until mid-term elections? Can their economy last until Nov. or will they be forced to negotiate prior?
More concerning for all of us here at home is how long can we as producers in the ag space hold on… There are some real heated debates brewing right now between “patriotism and the financial pain” being felt by those in rural America.
Soybean prices are already low and continue to fall. With good weather, high yield yields and pressure from trade disputes with China, it is hard to hold on to hope. The question is whether China’s economy will be able to hold out until mid-term elections. Can they survive until then or will they be forced to negotiate sooner?
Image courtesy of Corn and Soybean Digest