Chicago | Reuters — U.S. soybean futures turned higher on Monday after touching their lowest levels in over three weeks on expectations that domestic inventories will pile up due to a record harvest and the ongoing trade dispute with Beijing.
Prices recovered from a 4.7 per cent selloff on Friday that was ignited by a U.S. Department of Agriculture report saying U.S. farmers would produce their biggest-ever crop this year. The projection fueled concerns about oversupply as the trade fight has reduced demand from China, the world’s top soybean buyer.
Beijing has imposed tariffs on imports of U.S. soy in retaliation for moves by Washington as part of the tit-for-tat row between the world’s two largest economies.
Some U.S. traders, however, are questioning whether the harvest will live up to the government’s forecast. In a weekly report issued after the close of trading on Monday, USDA lowered its condition ratings for the soybean and corn crops.
“The crop’s not even in the bin yet,” said Jim Gerlach, president of agricultural broker A/C Trading in Indiana. “They’re going to keep a little bit of risk premium in there.”
Most-active November soybean futures closed 0.8 per cent higher at $8.68-3/4 a bushel at the Chicago Board of Trade (CBOT). The contract earlier fell to $8.51-1/4, its lowest price since July 18.
Traders are watching to see whether China resumes large-scale buying of U.S. soybeans after shifting its purchases to Brazil due to the trade dispute.
Other countries, such as Pakistan, have stepped up purchases of U.S. soy as Brazilian premiums have climbed amid the increased Chinese demand.
On Monday, USDA said private exporters struck deals to sell 142,500 tonnes of U.S. soybeans to Mexico.
Still, U.S. soybean production is outpacing demand, said Tomm Pfitzenmaier, analyst for Summit Commodity Brokerage in Iowa.
“Even if the Chinese situation gets resolved, there simply is not enough global demand,” he said.
Expectations for large supplies pressed corn futures to a 2-1/2-week low, after Friday’s USDA report pegged this year’s U.S. crop yield at a new record, according to traders.
Most-active CBOT corn ended 0.3 per cent weaker at $3.70-1/2 a bushel.
CBOT wheat sank 2.4 per cent to $5.33-1/2 a bushel, after touching its lowest price since July 27 at $5.30-1/2.
Friday’s USDA report did not cut global wheat production as much as analysts were expecting. On Tuesday, traders will look for the results of a wheat tender from Egypt, a top global buyer.
— Tom Polansek reports on agriculture and commodities for Reuters from Chicago; additional reporting by Gus Trompiz in Paris and Colin Packham in Sydney.