Soybeans Remain Volatile As Trade Talks Advance

Soybeans are some of the most important agricultural commodities in the United States. They are planted in a number of states such as Illinois, Iowa, and Minnesota. In recent months, the price of the soybeans has been in focus as the world has been engaged in a trade dispute. This is because China is the biggest buyers of soybeans. Therefore, when the Trump administration announced new tariffs targeted at China, soybeans were a good target for China when it placed retaliatory tariffs.

After the United States, the next major producer of soybeans is Brazil. As a result, when China imposed tariffs on American soybeans, the premium of Brazilian soybeans rose by $2 because of the perceived increase in demand for the beans. In recent weeks, as China and US have been having talks, the premium has come down by about $0.5 a bushel.

This is having implications even in the corporate world. This is because the world of soybeans is dominated by a few firms such as Bunge, Cargill and Archer Midlands. Yesterday, Bunge announced that it was slashing its forecast because of the challenging soybeans business. It also announced that it was replacing its CEO. Part of the reason was that the reduction of the prices from the US and a rise in price in Brazil.

In an interview at the World Economic Forum yesterday, Cargill’s CEO said that the soybeans industry was currently clouded in mystery as the trade talks continue. Recent signs show that the talks might not deliver a blockbuster deal as most traders had expected. Reports say that the two countries are far apart when it comes to key issues.

In the meantime, the price of soybeans has been a bit volatile in the past few weeks. The chart below shows the performance of the beans in the past six months. In recent weeks, the price has moved up as China ramps up imports from the US. If the talks end well, there is a likelihood that the price will continue the upward trend.

(Click on image to enlarge)

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