CBOT weekly outlook: Soybeans wade through turbulent trade waters

CNS Canada — Soybean futures on the Chicago Board of Trade suffered sharp losses Wednesday after China said it would slap a 25 per cent tariff on soybean imports in retaliation for U.S. sanctions that had been placed on it.

The dominant May contract plummeted 55 cents to $9.83 a bushel, before bargain-hunters stepped in and staunched the bleeding (all figures US$).

By mid-morning, the contract had moved above the psychologically-important $10 mark, which lent some support to values. It ultimately settled at $10.15 a bushel, down 22 cents for the day.

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According to written comments from Terry Reilly of Futures International, a future test of $9.40 per bushel basis for the nearby contract isn’t out of the question.

Soymeal could also be pressured down to around the $340-$350 per tonne level. Soyoil could dip to a range of 30.4 to 30.6 U.S. cents per pound.

The tariffs don’t kick in immediately, though, lending support to the notion cooler heads could prevail and a settlement could be reached.

Reilly points out China is also sitting on roughly 5.75 million tonnes of soybeans at its ports, which is enough to keep a 1.65 million-tonne crush rate going until the end of the month.

The Chinese tariffs could have hit at a worse time, too, as market participants had already started to shift their focus to South America.

Closer to home, the soybean basis should improve for Canadian growers as a result of increased interest in Canadian supplies.

According to Bruce Burnett of MarketsFarm, the seasonal start-up at the port of Thunder Bay should help in getting supplies from railcars to ships.

As for corn, the market sank in sympathy with soybeans. The May contract fell 16 cents to $3.72 a bushel.

There is speculation that once the initial shock of the tariffs wears off, corn could take back the ground it lost and even move a bit higher.

China has already shut off imports of U.S. ethanol, Reilly noted, so that is already baked into the market. Anti-dumping duties also exist on U.S. sorghum.

In recent weeks, buying had kicked in once the May contract dropped below the $3.72 level — but all bets are off. It may try and carve out a new range for itself, given China’s shakeup to agricultural markets.

— Dave Sims writes for Commodity News Service Canada, a Glacier FarmMedia company specializing in grain and commodity market reporting. Follow CNS Canada at @CNSCanada on Twitter.

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