U.S. grains: Soy futures break 10-year low on China trade tensions

USDA expected to confirm big crop supplies Friday

cbot july soybeans
CBOT July 2019 soybeans with 20-, 50- and 100-day moving averages. (Barchart)

Chicago | Reuters — U.S. soybean futures tumbled to their lowest prices in more than a decade on Thursday as traders worried that make-or-break trade talks between Washington and Beijing would fail to produce a deal.

Corn and wheat futures also fell as a two-day U.S.-China trade meeting was set to begin in Washington.

President Donald Trump has accused China of reneging on commitments it made in earlier talks and vowed to impose new tariffs on imports of Chinese goods at 12:01 a.m. ET on Friday. China has threatened to retaliate.

The escalating tensions discouraged U.S. farmers, who have been hoping for an end to the trade dispute that has slashed shipments of U.S. agricultural products to China. A deal could trigger accelerated commodity purchases by China, helping to reduce massive stockpiles of soybeans.

“The market is pricing in a ‘No deal,'” said Matthew Wiegand, broker at FuturesOne.

At the Chicago Board of Trade (CBOT), July soybean futures set a new contract low and ended down two per cent at $8.12-3/4 a bushel (all figures US$). The most-active contract reached its lowest price since December 2008.

Soybeans were previously the single most valuable U.S. agricultural export crop, and until the trade war, China bought $12 billion-worth a year from U.S. farmers.

CBOT wheat fell 2.3 per cent to $4.29-1/2 a bushel, while corn dropped 3.2 per cent to $3.53-1/4.

Traders were worried that China, as part of its potential retaliation against the U.S., may cancel orders for U.S. farm products, said Tomm Pfitzenmaier, analyst for Summit Commodity Brokerage.

The U.S. Department of Agriculture (USDA), in a weekly report on export sales on Thursday, said “unknown destinations” had canceled purchases of 263,500 tonnes of U.S. soybeans.

Total weekly export sales of U.S. soy and corn were below analysts’ expectations, as shippers face stiff competition from rival suppliers such as Argentina, said Jim Gerlach, president of A/C Trading.

“You’ve got cheaper values elsewhere so you shouldn’t expect to sell a lot,” he said.

China during the trade war has shifted its soybean purchases from the U.S. to South America, where supplies are ample.

Brazil’s agricultural agency Conab on Thursday raised its forecast for the nation’s 2018-19 soy crop to 114.313 million tonnes.

On Friday, USDA is set to issue a monthly report that confirms large U.S. inventories of soybeans, corn and wheat.

“We are swimming in supply,” said Kevin Van Trump, president of U.S. consultancy Farm Direction.

Reporting for Reuters by Tom Polansek in Chicago; additional reporting by Gus Trompiz in Paris and Naveen Thukral in Singapore.

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