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Trade Talk Isn't Worth A Hill Of Beans: US Surplus Could Dash Hopes of A Comeback In Soybeans

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Trade Talk Isn't Worth A Hill Of Beans: US Surplus Could Dash Hopes of A Comeback In Soybeans

After briefly bouncing back above the $9 level early in November on hopes that trade negotiations with China were progressing, 3-month soybean contracts are again struggling to even sustain themselves above $8.50.

While the indeterminate status of a trade deal with the world’s largest importer will remain an anchor on soybean prices, another albatross is ready to fall on soybean futures traders shoulders in the form of a massive U.S. surplus.

While traders might have already anticipated a surplus given that growers are all but locked out of the Chinese market, soybean farmers are actually going all in on the tariff gambit by opting not to sell their existing harvest to alternative markets. Instead, farmers are putting their crops in cold storage for the winter in hopes that any progress at all can be made in the intervening months to grant them renewed access to their biggest market.

While there’s little telling whether this hope will pay off for them (although economic signs from China point to a prolonged conflict), soybean future’s traders will almost certainly feel a further pinch regardless of a speedy resolution. The surplus comes at a record U.S. harvest and, in order to meet demand in China, record planting in Brazil. Should a trade deal emerge, excess product and increased production in other markets will eventually dampen whatever comeback soy futures might make in the short term.

What’s clear is that the pain in the soybean market isn’t likely to find relief before the new year, with the potential for an even tougher road to hoe in 2019.

Posted-In: RJO Futures soybeansNews Futures Commodities Global Markets Best of Benzinga

 

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