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Soybean Prices Emerge from Trade Cloud on Global Report
Minnesota Ag Connection - 05/11/2018

Trade uncertainty with China and ongoing North American Free Trade Agreement (NAFTA) renegotiations apparently won't hurt soybean exports long-term, according to Thursday's U.S. Department of Agriculture (USDA) World Agricultural Supply and Demand Estimates Report.

U.S. soybean exports are projected at nearly 2.3 billion bushels for the 2018-19 marketing year that begins on Sept. 1, up 225 million bushels from this year, the report said. With forecast global soybean import growth of 5 percent, the U.S. soybean export share is estimated at 39 percent, up from 2017-18.

Despite lots of trade rumors and rhetoric, Iowa Soybean Association (ISA) Market Development Director Grant Kimberley said U.S. soybeans are still selling.

"It's full steam ahead at ISA as we continue to build overall demand and customer preference for U.S. soybeans," Kimberley said. "The report is positive news, which is something farmers needed as they plant this year's crop. Producers shouldn't let uncertainties distract them from raising the highest-quality soybeans in the world."

Reduced stocks in South America this fall -- drought ravaged Argentina's soybean crop, lowering production by about 700 million bushels -- will limit export competition during the first half of the 2018-19 marketing year, the government predicts.

Soybean futures initially shot up about 20 cents after the report's release. July soybeans on the Chicago Board of Trade closed Thursday at $10.21 per bushel, up nearly 5 1/2 cents. The USDA 2018-19 U.S. season-average soybean price range is forecast at $8.75 to $11.25 per bushel compared with $9.35 per bushel this marketing year.

Will today's report generate a sustained rally? The answer is likely no, given the strong headwinds facing the U.S. soybean industry. The threat of a 25-percent tariff on U.S. soybeans by China in retaliation for proposed U.S duties on Chinese goods looms. And, a new NAFTA deal with Mexico and Canada isn't a certainty.

ISA leaders plan to do everything they can to help. ISA is eyeing additional visits to China, a country of 1.4 billion consumers, and meeting with buyers in countries that offer opportunities to increase consumption of U.S. soy.

"The main thing is we have product that needs to get exported," said Delbert Christensen, a past ISA president and United Soybean Board member from Audubon. "We're hoping that something can get figured out with China to continue selling soybeans to this valuable customer."

Chinese buyers have reportedly stopped purchasing U.S. soybeans and are canceling orders on the books, which isn't uncommon since South America's crop is being harvested. However, crushers in Europe and Argentina are turning to the U.S. now due to higher premiums for Brazilian beans.

Al Kluis, managing director of Kluis Commodities of Wayzata, Minn., was shocked the USDA reduced 2018-19 U.S. soybean ending stocks to 415 million bushels, down 115 million from the revised forecast this year. The USDA predicts China will import nearly 3.8 billion bushels of soybeans in 2018-19, up 220.5 million from the current marketing year.

"Thank you, China," Kluis said during a webinar with clients today. "Whether they buy from the U.S. or Brazil, it doesn't matter. It's a global market."

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