Price Volatility Returns To The Soybean Complex

May 04, 2018 5:02 PM

On April 4, 2018, soybean futures quotes suffered a highly volatile day upon China’s announcement of import tariffs on U.S. soybeans. Soybean futures dropped over five percent in value before recovering about half that loss on the market.1 However, subsequent to the announcement, soybean futures recovered all of the immediate loss.

This positive turn can be explained by three factors: the recent dialogue between Chinese and American officials, the demand of U.S. soy regardless to any trade war, and the weather-related reduction in the Argentine soybean crop.

In the April USDA World Agricultural Supply and Demand Estimates (WASDE) update, USDA projected global soybean imports to be up five percent at more than 150 million metric tons.The U.S. is projected to produce 37 percent of soybeans supplied to the world. Brazil is expected to produce 48 percent, while the remaining 15 percent will be sourced from other origins. Tariffs on U.S. soybeans will not significantly affect the ultimate export number for domestic soybeans.

Any negative impact on soybean values would tend to weigh most heavily on soybean oil values, since global soybean meal demand remains extremely robust in the developing world. As more soybean meal is used to feed livestock and poultry, oil surpluses develop.3 The latest WASDE update forecasted U.S. soybean oil stocks to be at a near 2 billion pounds in September 2018. 2 This would be the densest level in six years. USDA is forecasting 2017-18 soybean oil prices to average about 1 cent per pound, which is similar to its current level.

References

1. “CME Soybean Futures Quotes.” http://www.cmegroup.com/trading/agricultural/grain-and-oilseed/soybean_quotes_globex.html CME Group. April 11, 2018.
2. “World Agricultural Supple Demand Estimates.” http://usda.mannlib.cornell.edu/usda/current/wasde/wasde-04-10-2018.pdf United States Department of Agriculture. April 10, 2018.
3. “CME Soybean Oil Futures Quotes.” http://www.cmegroup.com/trading/agricultural/grain-and-oilseed/soybean-oil_quotes_globex.html CME Group. April 11, 2018.

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Richard GallowayAbout the Expert

Richard Galloway is president of Galloway and Associates, LLC, a business consulting firm serving domestic and foreign agricultural processing, vegetable oil refining, biodiesel and grain handling industries. Galloway is a consultant to the QUALISOY Board, a collaborative effort among the soybean industry to help market the development and availability of trait-enhanced soybean oils, including high oleic soybean oil. Read More...