Reader "Davidson" submitted:
Soybean prices, tariffs? What is the truth to the current media football?
The facts are presented in the Trade Weighted US$ Major Currency vs. Soybean Prices history. From 1973, Soybean prices did not display a significant correlation with currency fluctuations. Starting in 2003 with the inception of computer-driven algorithm trading there is a strong inverse relationship. You will recognize a similar pattern in oi prices. Since 2003 US$ strength has forced commodity prices lower due to algorithmic trading while falling US$ resulted in higher commodity prices.
The recent tariff discussion has not as yet had any unusual impact on soybean prices different from the inverse relationship with the US$ in my opinion. US agricultural industry has experienced weaker pricing since Russia invaded Ukraine and the rise in terrorism and autocratic governments as global investors shifted capital to the US$ assets for safety. While some of this has reversed as the ISIS threat has diminished, the US dollar still remains quite elevated vs. its historical trend.
Currently, the focus on recent Soybean price changes ignores the importance of the US$ relationship which remains the most influential for Soybean pricing.
If there is a tariff impact on Soybean prices, it is too small to separated from the normal volatility and inverse US$ correlation.
Don’t believe the media hype!!
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