February 2018 will go down in history as the month that Argentina’s soybean crop hit a new crisis level. Ongoing drought across the region coupled with delays in Brazil’s harvest has unleashed speculators across the soybean complex.
For the month, the May contract in Chicago closed the month up 5.5%, continuing the frantic surge caused by short-term supply concerns. The uptick has continued, despite broader trade concerns between the United States and China. The Trump Administration is considering tariffs on steel and aluminum imports, news that would put a dent into Chinese shipments of both products to the United States, in addition to imports from a dozen other nations.
The decision looms as China considers its own restrictions on U.S. soybeans. China was considering the plan, but it has needed to conduct an assessment of the impact of restrictions on its own soy crushing and livestock industry. Though the simple answer is that it will drive up the cost for local farmers, the bigger story is a looming trade war.
Other Factors Impacting Soybean Prices
Of course, those were not the only headlines dominating the soybean sector this month.
This month we have focused on the shifting global dynamics in soybean production and trade relations, specifically how China, Argentina, and Brazil could impact U.S. and Canadian soybean exports. Specifically, in the month of February, we’ve looked at:
• How much soybeans will Argentina grow (and how political risk there plays a factor);
• What will become of the U.S. and China’s trade relationship;
• Who the real king of soybeans is; and
• The incorporation of canola into soybean rotations across the U.S. and Canada.
Moving forward, there’s a lot of ideas that soybean prices could continue to run up due to speculation, the USDA’s historical pace of revisions to Argentina’s crop, and the potential that we see an increased shift to soybean acreage here in the United States.
Be sure to sign up for for free 3-week trial at GrainCents as this month could be the most impactful for how and when you price your soybeans for the rest of 2017/18 old crop supply, as well as a significant portion of your potential 2018/19 production.