By Benjamin Parkin
Soybean prices fell to their lowest point in nearly a decade, after a report forecast that Chinese tariffs will cut into exports and push up stocks of one of America's most widely grown crops.
The U.S. Department of Agriculture on Thursday projected stocks of soybeans for the 2018-19 crop year at a would-be record of 580 million bushels, around 50% higher than its previous estimate and more than analysts expected.
Beijing last week introduced retaliatory tariffs on U.S. soybean imports, as both countries lash out with duties on tens of billions of dollars in goods amid an escalating trade dispute.
China "is trying to put the fear into us right now," said Brian Grossman, a market strategist at Zaner Group, of the USDA's figures.
The USDA expects exports to China -- the largest buyer of American soybeans -- to suffer as a result of the duties. Soybean exports next year will fall by 11% to 2.04 billion bushels, the agency said, with higher market share in other countries failing to offset the lost demand.
Soybean prices slid after the report. July-dated contracts touched $8.26 a bushel at the Chicago Board of Trade, trading at the lowest point since December 2008. The report was "bearish" for soybean prices, said Terry Reilly, a senior analyst at Futures International.
Analysts say many U.S. farmers, who this year planted more soybeans than corn for the first time in 35 years, will struggle to turn a profit at such low prices.
The tariffs are also expected to hurt Chinese consumers of soybeans, who will have to deal with higher domestic prices as some as importers are forced to absorb the duties. Despite a recent string of bumper crops in Brazil, there aren't enough soybeans in the world for Chinese buyers to avoid U.S. product altogether, analysts say. Chinese soybean imports next year will fall by 8% as a result, as domestic pig farmers and other users seek out alternative sources of oilseed.
The global soybean surplus will rise to 98.3 million tons next year, the USDA said, 13% higher than its previous estimate.
The agency projected a starkly different outlook for the corn market, forecasting a larger-than-expected drop in global supplies and higher exports of the U.S. crop.
U.S. corn stockpiles are due to fall to 1.55 billion bushels in 2018-19, down almost 25% from a year earlier, with global stocks sliding around 20% to 260.9 million metric tons.
Corn futures for July rose 1.6% to $3.36 1/2 a bushel after the report.
Traders were concerned that the USDA would forecast a reduction in U.S. corn demand from Mexico, the U.S.'s largest buyer. Both countries have recently clashed over trade, prompting Mexico to introduce duties against a range of agricultural goods.
Some fear that corn could be next. But others see concerns dying down.
Mexico's president-elect, Andrés Manuel López Obrador, "appears to have a less cantankerous approach" to trade tensions with the U.S., said Rich Nelson, a strategist at brokerage Allendale Inc.
Write to Benjamin Parkin at [email protected]