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Argentina's Rains Could Stabilize Soybean Market
Soybeans ended the week's trade on a volatile note as weather concerns continued to provide support to the beans, while concerns that our world trading partners will retaliate by taxing US Ag imports due to the steel and Aluminum tariffs President Trump has threatened to impose, capped the market move higher. The Argentina forecast continues to be dry for the next week but there is an increased chance for a general rain event next weekend.
We think the trade will be hesitant to press the short size of the market until they are confident that Argentina will receive this much needed rain which will help stabilize the crop. The only exception to this thought is if China would slap import tariffs on US bean imports. If they would do this, we think the market would go lower even if Argentina has not received rain. It does look like the world buyers are getting more nervous about the Argentine crop as well as the potential of a trade war heating up as they are getting more aggressive getting needs covered.
This week's overnight soybean sales have been much stronger than the past few weeks. US grain firms have sold 824,000 tonnes of old crop soybeans from the overnight sales system from Monday through Friday. We have sold 123,000 tonnes of the 2018/19 crop. It is good to see these buyers show up as the year to date sales only total 1.674 billion bushels. 2.100 billion is USDA's whole-year goal. We have only sold 80% of USDA's goal. Normally by now this is at 92%. If the remaining deficit is not made up, we will miss USDA by 252 million bushels. If all these bushels were added to the ending stocks they would balloon to incredibly bearish 782 million bushels vs last year’s 302 ending stocks.
The big debate in the industry today is will President Trump go through with his threat to implement steel and aluminum imports tariffs of 25% and 10 % respectively. If he does, this should be worrisome to US producers. When the US implemented tariffs on Chinese produced solar panel and washing machines the Chinese punched back two weeks later when they launched an anti-dumping investigation into U.S. sorghum exports which pretty much stopped the sale of US sorghum into China.
With the charts looking positive and the rains yet to materialize we would look for the market to continue to find strength near term. These new trade tariffs that were announced by the President only add to the economic risk that producers are carrying as it only increases the chance of a trade war with our biggest trading partners. We believe producers should be locking in profits when they have the opportunity due to the uncertainty they are currently facing.
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