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Where Will Soybean Prices Go After Trade Negotiations With China?
President Donald Trump will meet with Chinese President Xi Jinping at the G20 Summit in Argentina this weekend. All hopes are resting on some type of trade breakthrough paving the path toward resumption of normal trade or at least a positive advancement toward normalized relations and future negotiations.
What happens if there is a breakthrough? What happens if trade talks break down and tensions escalate? Soybean producers should prepare for all scenarios that could create price changes. That is, rehearse the future so you are ready when events change, which could be this weekend.
The alternative to preparing is to take a wait-and-see attitude. While this can pay big dividends if the market works in your favor, you could also incur significant risk. In other words, you are on both ends of the price spectrum.
Understand that no strategy is still a strategy. If you're storing soybeans, there is a chance that prices could move higher, particularly if an agreement between the U.S. and China is reached. However, you take considerable risk in doing so. If an agreement (or at least an advancement) does not occur, record carryout would be viewed as burdensome and could send futures price to $8.00 or lower. Consider selling soybeans prior to the weekend and purchasing a call option for re-ownership. If you want to store, purchase a put to establish a price floor. In either case, you stay in the market with a more refined risk.
Predicting accurate short-term price movement is difficult. Add to the mix a tense political environment and weather affecting South American soybean production, and you have an unending array of varying price scenarios. Use strategy and marketing tools to shift risk and take advantage of opportunities.
If you have questions or comments contact Top Farmer at 1-800-334-9779 Ext 129.
Futures trading is not for everyone. The risk of loss in trading is substantial. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Past performance is not necessarily indicative of future results.