Chicago | Reuters — U.S. soybean futures surged on Friday as the market recovered a day after nearing a decade low on concerns over the escalating trade war with China.
Prices climbed as the U.S. implemented tariffs on $34 billion in Chinese imports and Beijing said it would retaliate with planned duties on products, including soybeans (all figures US$).
Traders had been bracing for the moves for weeks and said the market was due for a bounce.
“We’re seeing a typical ‘sell the rumour, buy the fact’ scenario,” said Monte Peterson, a soybean grower in Valley City, N.D. and a director for the American Soybean Association, an industry group.
Beijing’s extra 25 per cent tariff on U.S. soybeans is expected to curb Chinese demand for U.S. shipments further and shift more sales to Brazil, the world’s top exporter. That prospect has contributed to a five-year high in the spread between U.S. and Brazilian prices.
Soybean futures have already dropped 15 per cent over the past month on concerns about reduced demand from China, the world’s top importer of the oilseed. The crop is U.S. farm country’s most valuable agricultural export to China, worth more than $12 billion last year.
“Most farmers are probably lying to you if they tell you they’re not worried about the tariffs,” said Trent Hall, who grows soybeans and corn in Wolcott, Indiana.
Nearby, Chicago Board of Trade soybean futures climbed 4.6 per cent to $8.74 a bushel. On Thursday, the market fell to $8.34, the lowest price for a front-month contract since late 2008.
November soybeans, which represent the crop that will be harvested this fall, jumped 4.5 per cent to $8.94-1/2 a bushel, after earlier setting a contract low of $8.53-1/4.
Short-covering and profit-taking helped lift prices following the recent declines, traders said.
“The market is a little fatigued at this stage, having largely priced in these tariffs,” said Michael Magdovitz, commodities analyst for Rabobank.
The trade fight also roiled Chinese markets.
China’s soymeal futures fell more than two per cent on Friday afternoon before erasing most of the losses amid initial confusion over whether China had implemented its retaliatory tariffs.
“The only good news is that it is now behind us and we can begin to look forward to whatever is next,” Tomm Pfitzenmaier, analyst for Summit Commodity Brokerage in Iowa, said of the tariffs.
CBOT September wheat rose 1.9 per cent to $5.15-1/4 a bushel, while December corn gained 2.3 per cent to $3.73 a bushel.
— Tom Polansek reports on agriculture and commodities for Reuters from Chicago; additional reporting by Gus Trompiz in Paris and Naveen Thukral in Singapore.