Soybean prices plummeted again this week, closing 05/09 (Thursday) at US$ 8.00/bushel. A week earlier the first month quoted had ended the week at US$ 8.30. Two factors were essential for this movement, in addition to the climate issue in the USA, which leads the market to still expect a larger area to be sown with soybeans in that country: 1) the statements by the US president pointing to new increases in tariffs on Chinese products; 2) the USDA supply and demand report to be released on 5/10.
As for Donald Trump's statements, they were a “bucket of cold water” on the market, hopeful for a trade agreement between the USA and China that would bring the dispute to a good conclusion this May. In fact, on Friday, May 3, China sent the US a draft of almost 150 pages of the trade agreement to be signed, however, there were important changes in relation to what had been discussed.
In other words, China would backtrack on items of great commercial interest to the US. In view of this, on Sunday 05/05 the US president announced that from this day 10/05 (the order would have been signed on Wednesday, 05/08) the USA would increase tariffs on US$ 200 billion from 10% to 25% on goods imported from China and announced taxes on previously exempt products. China immediately announced that it will retaliate against the new US stance. Now, if all this actually happens in practice, the trade agreement could even be signed at the end of May, however, it will have little practical effect in terms of removing tariffs and leading the Chinese to import, for example, more soybeans from the USA.
On the other hand, it cannot be forgotten that the current reduction in Chinese soybean imports is much more due to the African swine fever crisis, which continues to affect Chinese pig herds, than due to the commercial dispute. Even because, since January, China had partially resumed its soybean purchases from the USA.
As for the supply and demand report, it will be the first of the year to indicate a summer harvest projection in the USA. In this sense, the market expected the announcement of a soybean harvest, to be carried out from mid-September, at a height of 113.9 million tons, compared to 123.7 million harvested in the last harvest. This reduction of almost 10 million tons, however, ended up being absorbed by the fact that Brazilian production would be maintained at 117 million tons and that of Argentina would be increased to 55.8 million tons.
As a result, there would be a large global supply of the oilseed at a time when the world's main buyer is reducing its purchases. Projections for the report also pointed out that ending stocks in the USA, for the year 2018/19, would rise to 25.2 million tons, while for the year 2019/20 they would reach 25.7 million. World ending stocks were expected at 109 million tons for 2018/19 and 113 million for 2019/20.
We will comment on the final numbers of the aforementioned report in our next bulletin, as it was published after the end of this current commentary.
Furthermore, US net exports for the year 2018/19 were 313,400 tonnes in the week ending 25/04, recording a decline of 61% over the average of the previous four weeks.
Given all this, not even the confirmation that the planting of the current soybean harvest is delayed, due to excessive rain in the American Midwest, served to reverse the downward movement in Chicago. In fact, the aforementioned planting, until 05/05, reached 6%, against the historical average of 14% for this season. However, for now, the market still considers that the biggest problem is the delay in corn area, a fact that could transfer area to soybeans until the end of summer sowing.
Here in Brazil, prices remained relatively stable, however, continuing with a downward trend. The average at the Rio Grande do Sul counter was R$ 64.46/bag, while lots ranged between R$ 69.00 and R$ 70.00/bag, falling for the first time, after a long time, below R$ 70.00. In other national markets, lots ranged from R$ 60.00/bag in Sorriso (MT) and R$ 75.50/bag in Campos Novos (SC), passing through R$ 69.00 in the center and north of Paraná; R$ 64.00 in Goiatuba (GO); R$ 61.50 in São Gabriel (MS); R$ 66.00 in Uruçuí (PI) and R$ 64.00/bag in Pedro Afonso (TO).
Post | Guilherme R. Bezzarro
Author | Aline Merladete
Source | agrolink
