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CBOT weekly outlook: Soy recovers from wild week

CNS Canada — After a wild week in which the Chicago Board of Trade (CBOT) soybean market plunged, following China announcing tariffs on imports of U.S. soybeans, it has recovered.

China on Thursday announced plans for a 25 per cent tariff on U.S. soybean imports in retaliation of previously announced tariffs by the U.S. on $50 billion worth Chinese goods (all figures US$).

The CBOT soybean market quickly took notice, dropping significantly in price. Basis levels in Brazil rose as buyers abandoned the U.S., with one trader saying Brazilian soybean prices were a dollar higher than in the U.S.

“All of the sudden (we’ve had) a lot of business. A lot of it apparently from Europe, Mexico here today, and then the last couple of days even Argentina has been coming and buying U.S. soybeans, just because they’re so much cheaper than the Brazilians,” said Jack Scoville of Price Futures Group in Chicago.

The U.S. Department of Agriculture (USDA) on Tuesday released its monthly supply/demand report, which was for the most part neutral; soybeans received a bit of support after USDA lowered its global soybean ending stocks forecast to 90.8 million tonnes, from 94.4 million in March.

CBOT corn contracts were weaker due to USDA not increasing its ending stocks estimates. World stocks were instead lowered to 197.8 million tonnes from 199.2 million tonnes in March. Corn wasn’t affected as much by China’s tariff threats, as the U.S. sells little corn to China.

According to Scoville, both the May corn and soybean contracts have regained ground and are hitting close to recent highs.

May corn is over $3.90 per bushel, striking close to a previous high of $3.95 per bushel. The May soybean contract is also up; on Tuesday it was sitting in the $10.60-$10.64 per bushel range, about 18 cents off its previous high.

“I think there’s been some U.S. selling in the soybeans as well from U.S. producers. Corn I know there’s been some selling, producers trying to take advantage of these somewhat better prices and that’s kind of put a lid on the market,” Scoville said.

Overall, he said, he thinks the market is getting closer to highs than to lows; he thinks the corn contract could go over $4 while the soybean contract could have a chance to go back over the recent highs of $10.80.

“That would probably be driven by the strong demand that we’ve seen develop ever since these tariff announcements came out,” Scoville said.

— Ashley Robinson writes for Commodity News Service Canada, a Glacier FarmMedia company specializing in grain and commodity market reporting.

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