Soy, imprisoned between the trade war and the super harvests

Pablo Adreani

On July 6, the United States began enforcing their decision to apply a 25 percent tariff on a US import list.

China responded that it would not start a round-trip war before every decision made by the US government; The strategy of the Chinese government is to go step by step and respond with measures that hurt the most Americans.

In our Agribusiness newsletter, we said a month ago that the Chinese measure implied a fall in American soybean producers. $ 90 per tonne income

It should be noted that soybean prices in Chicago have already been adjusted downward, with a decline of $ 72 between June 1 and the close of the market by writing this column. This means that the market has already adjusted 72 of the theoretical $ 90 that it had to adjust. The big question is whether this decline is due to the expectations of a large soybean crop or whether it is a response to the announcement of tariffs by China.

Super harvests

With regard to world production, in its July 12 report, Usda adjusted upwards its soybean estimate in Brazil (to a record high of 120.3 million tonnes); also adjusted to 117.3 million soybean crop in the United States (second-highest record), and for Argentina a volume of 57 million tonnes.

If the Sino-US trade war. continues to rise, which happens, US producers could go bankrupt, because these prices are not enough to offset their costs of production. For this reason, the government of Donald Trump should defend farmers by granting them subsidies to compensate for lower prices due to Chinese tariffs. Exactly, a few weeks ago, we learned that the Trump administration would grant subsidies to its producers. In the overall badysis, the theoretical loss of farmers is close to $ 2,800 million. [19659003] The current situation, the decline of the market in the face of a record harvest of three times soybeans: the world is on track to achieve a record soybean crop, which can exceed 360 million tonnes. The world's top three producers could record a record triple harvest if the weather conditions remain normal and not exceptional, as happened with the drought and subsequent excess rainfall during the previous harvest and particularly in Argentina.

Brazil is on track with the super harvest above 120 million tonnes, surpbading US soybean production for the third year in a row. Argentina, if the weather does not surprise, can exceed 62 million tons. The only question today is soybean production in the United States; Although the Usda projects it at 117.3 million tons, it is still not defined. The climate will now have the last word; what remains of the month of July and the entire month of August are key months for the definition of summer crops.

The question of the million is whether the decline will continue. Today, available soybeans are priced at $ 280 per tonne, while new soybean prices in May 2019 at Matba are trading at $ 278.5. However, the January soybean position in the Matba is quoted at $ 300 today, while the future January dollar at Rofex closed at $ 303.65. In January, the sale of soybeans at $ 300 and the future sale in dollars, the price in pesos for the month of January, was 10,000 pesos, against an available market which is now 7 750 pesos a ton.