What’s New? Tired Soybean Traders Ask As Trump Delays Trade Deal — Again
Investing.com | Dec 04, 2019 17:36
To soybean traders—and perhaps planters too—Donald Trump might as well have said that 50 billion pies will fall out of the sky for them each year.
Get The App
Get The App
Since the U.S. president promised in October that China will buy $50 billion or more of farm products from the United States a year under the phase one of their trade agreement, grain markets’ belief in an imminent deal has turned from hope to prayer and, finally, despair.
Get The App
So, when Trump announced on Tuesday that a pact with China will likely come after 2020—to deprive Beijing of any advantage it may have in pressuring him for a settlement in its favor before next November’s U.S. presidential election—there was an almost discernible yawn from the agricultural trading community.
The U.S. soybeans market—poised to be the biggest beneficiary of any China deal—surprisingly closed in the positive, after 10 days in the red, suggesting relief that the trade ballyhoo was finally over and the market could go back to focusing on some “real” fundamentals.
Get The App
“The trade war rumbles are front and center, but thankfully grain markets appear to be looking beyond that news,” said Dan Hueber, founder of The Hueber Report, a St. Charles, Illinois-based agricultural risk consultancy.
Get The App
Get The App
Hueber noted that the delayed China deal wasn’t the only bad news in commodity markets on Tuesday. Less than 24 hours earlier, the Trump administration had also announced tariffs on all steel and aluminum imports from Brazil and Argentina, and threatened up to 100% duties on $2.4 billion of French cheese, champagne and other products.
Get The App
Soybeans aside, U.S. corn prices also fell modestly on Tuesday. Only wheat got crushed but that was probably due to the fact it had been overbought recently on fears of tight supply, said traders.
Get The App
Added Hueber:
Get The App
“I suspect tariff fatigue is becoming more and more ingrained within the psyche of the trade.”
On the contrary, equity markets were more “unsettled” by Trump’s China announcement, Hueber noted, with stocks on Wall Street suffering their biggest daily loss in two months.
Get The App
So, where would U.S. soybeans trade fundamentally if big buyer China is out of the equation—a prospect looking increasingly likely after Dec .15, when the Trump administration and government of President Xi Jinping exchange even more punitive tariffs?
Get The App
According to Investing.com’s Daily Technical Outlook, Chicago-traded soybean futures for January delivery remain in a “Strong Sell” position. Yet, there’s potential for the contract to test $8.8336 per bushel in a rebound, versus Tuesday’s settlement of $8.7275.
Get The App
Said Jack Scoville, who heads grains analysis at Chicago brokerage Price Futures Group:
Get The App
“The U.S. harvest is entering its final stages now and many producers are putting their soybeans into storage and not selling. This has caused basis levels for soy to firm in the country and at the Gulf of Mexico.”
Scoville concurs with Hueber that the market “is tired of hearing about the potential U.S.-China trade deal, and wants to see the real thing.”
Get The App
In the case of corn futures, Investing.com’s Daily Technical Outlook holds a “Strong Buy” recommendation for the March contract, forecasting a top-end resistance of $3.8820 per bushel versus Tuesday’s settlement of $3.8150.
Get The App
“While March corn hasn’t broken through key resistance, it continues to flirt with resistance around the $3.83 mark,” said Hueber.
Get The App
“Indicators have turned higher, and we may close above the 21-day moving average. The path of least resistance should be transitioning to the upside.”
For March wheat futures, Investing.com’s recommendation is “Neutral”, with top-end resistance at $5.5294 per bushel and firmest support at $5.0272. Tuesday’s close was $5.2538.
Get The App
Said Scoville:
Get The App
“World wheat prices will still be dictated by what happens in Europe and the Black Sea area, and U.S. prices will most likely remain a follower as the U.S. tries to compete for sales. Chart patterns on daily and weekly charts imply more up pressure on prices this week though.”
Crop fundamentals aside, fund alignment in grains could also turn positive, pushing prices higher.
Get The App
Added Hueber:
Get The App
“It would come as no surprise to anyone watching the soybean market as of late that speculative funds have been sellers, and as it turned out, they sold a record quantity."
“While I would not suggest the boat is ready to tip, it is undoubtedly beginning to list to one side.”
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.