US Soybean Farmers Face Uncertainty Amid Trade Tensions with China

Soybeans were marginally higher due to fund and technical purchasing. South American crop development is positive, with Argentina and Brazil expected to yield huge crops by 2025. Oilseed production in the United States is expected to reach 131.2 million tons in 2024/25.

Soy remained America's leading agricultural export, contributing $31.2 billion to the US economy in the 2023-2024 marketing year. Soy export volumes fell from the previous year to 60.8 million metric tons, primarily due to lower carry-in stocks and increased domestic crush. However, U.S. soybean meal exports established a new high of 14.4 million metric tons, worth $6.7 billion. US soybean oil exports have also increased significantly in 2024, owing primarily to a surge in palm oil prices. South American countries such as Brazil and Argentina have increased soybean output to suit China's demand, with both predicting near-record or record soybean crops in 2024-25.

China is eager to increase its soybean imports from South America to replace US supplies, with Brazilian soybean exports set to reach 97 million tonnes in 2024-25. A new trade battle is expected to provide South America another irreversible production boost. However, since Trump's election, China has increased its imports of US soybeans in anticipation of prospective duties next year. The United States' growing domestic soybean crushing capability to create soybean oil and soybean meal is also cause for optimism.

According to a top industry expert, US soybean farmers may face even harder conditions if fresh tariffs spark a trade war between the US and China in 2025. Since President-elect Donald Trump's election victory in November, he has proposed many tariff proposals aimed at China, causing soybean prices to fluctuate. If China imposes latent duties, US soybean prices would fall by around 60 cents per bushel, or $1 per bushel, similar to what happened in 2018, when tariffs Trump imposed on Chinese imports spurred retaliatory measures that limited US supplies to the world's largest soybean consumer.

Donald Trump's first trade battle with China had a catastrophic impact on American soybean farmers, resulting in a loss of roughly 80% of exports. As tensions increase for a future replay, China diversifies its agricultural imports, looking to Brazil, Argentina, and Australia for commodities such as soy, corn, and cotton.

The global soybean market is predicted to be well supplied until 2025, causing prices to plateau. The global balance appears to be improving, with ending stocks at a record high of about 132 million metric tonnes. The US soybean supply has been bearish, with soybean area expanding by 4.2% year on year and yields increasing by more than 2%. South American soybean output is likely to increase, with Brazilian and Argentine production rising by 10% and 6%, respectively.

The market is now focused on the 2025/26 harvest, with plantings scheduled to commence in the spring. The soybean-corn ratio indicates that farmers should cut soybean plantings in favor of corn. However, if US President-elect Donald Trump pursues his trade agenda forcefully, it could have an impact on plantings, potentially leading to a more aggressive shift from soybean to corn planting.

Soybeans are trading with a small pullback, with futures staying steady on Tuesday as the USDA made minimal revisions to the US or global balance sheets. Soybeans are trading up 4 to 5 cents in adjacent markets on Wednesday. According to analysts, Chicago Board of Trade soybean futures climbed on Wednesday, fueled by momentum in other markets.

CBOT soybeans are expected to average $9.70/bu through 2025, with prices remaining low to reduce soybean area. Domestic crush margins in the US soybean business have risen as renewable fuel output has expanded.

Data for Technical Analysis (30Min) CFD US Soybeans Futures - Jan 25 (ZSF5)

Resistance : 992.65, 992.94, 993.42

Support : 991.69, 991.40, 990.92

30Min Outlook    

Source: TradingView

Buy/Long 1 If the support at the price range 991.09 - 991.69 is touched, but the support at 991.69 cannot be broken, the TP may be set around 992.84 and the SL around 990.79, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 992.65 - 993.25, TP may be set around 995.40 and SL around 991.39, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 992.65 - 993.25 is touched, but the resistance 992.65 cannot be broken, the TP may be set around 991.59 and the SL around 993.55, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 991.09 - 991.69, TP may be set around 989.20 and SL around 992.95, or up to the risk appetite.       

Pivot Points Dec 12, 2024 02:49AM GMT