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Soybean prices surged from the level of US$893.12 (US Soybeans future), which marked a day's low on 20th February 2019, amid developing resolution between U.S-China trade dispute. The U.S-China trade dispute marked a fall in Soybean export from the U.S., where almost 60% of soybean production is exported. The higher tariff by China in the event of U.S-China trade dispute led to the halt in the export of the commodity and in turn harmed the prices previously. The developing resolution among the two major economies along with China's commitment to buy an additional 10 million metric tons of U.S. soybeans has provided a support to the soybean prices. However, the building record high of soybean stocks is concerning the market participants and the commodity is hovering around US$930.
The trade dispute, which also marked concern for global economic slowdown, has caused soybean prices a net decline of approx.11.62% on year on year basis as per the current price. The current 52-week range for soybeans is 810.50â1071.00. The total shipment of the U.S.-grown oilseeds declined after China imposed a tariff of 25% in July 2018.
To further gauge the direction of the prices, the market participants are eyeing on the supply of the demand dynamic of soybeans.
Demand & Supply dynamics: The U.S. soybeans planted over an area of 89.2 million acres in the period of February 2018 to February 2019, marked a rise of 0.1 million acres as compared to the previous corresponding year( February 2017 to February 2018). The yield (Bushels/Acre) increased from 49.3 to 51.6 as a result of the increase in planted area.
The total supply stood at 5,002 million bushels in the period from February 2018 to February 2019, which marked an increase from 4,735 million bushels in the period of February 2017 to February 2018. The total export of the soybeans for the period from February 2018 to February 2019 stood at 1,875 million bushels, marking a sharp decline in the export line as compared to the period of February 2017 to February 2018, where the exports stood at 2,129 million bushels.
The ending stock on the supply side for the period from February 2018 to February 2019 stood at 910 million bushels, which marked a significant gain when compared to previous corresponding year, where the ending stock stood at 438 million bushels.
The building soybeans stock and a decline in export could exert the pressure on the price and is something where market participants are keeping their eye.
However, on the demand side, the recent pleading by China to buy an additional 10 million metric tons of U.S. soybeans in the event of building resolution among the two major economies is offsetting the increased stock concern.
The direction of soybeans prices will depend upon the combination of the supply and demand dynamics along with the trade talks. The delegation from both the major economies are moving ahead with the dialogues, and market participants are building optimism over the trade talks, which in turn is supporting the soybeans prices at the present status quo.
The U.S. soybeans, stocks to usage ratio is at 22.2% from February 2018 to February 2019, which marks an increase in domestic consumption as compared to previously seen 10.2%.
The direction of soybeans prices would move with respect to all the market dynamics such as building stock, domestic consumption, exports and development in U.S-China trade talks.
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