U.S. Soybean Prices Crumble as Trade War Sparks Brazil Rally

July 6, 2018 09:19 AM
Soybean prices in the U.S. and Brazil, the nations that account for roughly 80 percent of global exports, have taken drastically different paths thanks to Donald Trump’s trade war.
  • Cash prices in the U.S. reach lowest in almost a decade

  • Premiums for Brazil supplies have more than tripled since May

Soybean prices in the U.S. and Brazil, the nations that account for roughly 80 percent of global exports, have taken drastically different paths thanks to Donald Trump’s trade war.

In the U.S., average cash prices fell to about $7.79 a bushel this week, the lowest in almost a decade, according to an index compiled by the Minneapolis Grain Exchange. China’s tariffs on American goods including farm products have now taken effect after the U.S. implemented a raft of duties earlier in the day Friday and President Trump threatened more action.

Meanwhile in Brazil, exporters have been handed high times. Soybeans to be loaded in August at the nation’s Paranagua port fetched $2.21 a bushel more than Chicago futures as of Friday, the widest gap since data starts in 2014. The premium has more than tripled since the end of May, according to data from Commodity 3.

"Premiums reflect the rising possibility of China being more dependent on Brazil’s soybeans," Luis Fernando Roque, an analyst at consultancy firm Safras & Mercado, said in a telephone interview from Porto Alegre.

The rally means the added premium for Brazil supplies are equal to about two-thirds the cost of the tariffs China is planning to levy on U.S. shipments, according to a report from INTL FCStone.

So far, good crushing margins are helping to keep Chinese demand robust for Brazilian supplies, even with surging premiums. China bought about 1.1 million metric tons of soybeans from Brazil last week, while no purchases from the U.S. were reported, according to the China National Grain and Oils Information Center.

That’s an unusual move for this time of the year, when China usually starts booking U.S. supply in the months before the North American harvest starts. Supplies in Brazil begin to fall after shipments peak for the season in May.

-Copyright 2018 Bloomberg LP

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Spell Check

Fowler, IN
7/7/2018 07:46 PM

  I am not going to comment as to whether Bloomberg is biased. But this specific article seems pretty factual. Do you believe they are biased by reporting these facts, or do you have data indicating that the Chinese aren't buying more from Brazil? In my mind the second is bias. The first is the data I look for from them. Since the tariff talk has happened, it appears that China is responding like most assumed they would - by buying from alternative suppliers pushing down prices for American farmers and raising them in Brazil. Oil traders are reporting the same thing happening in US oil exports.,China is buying from the Middle East instead of the US, pushing US prices down versus global benchmarks.

Lockport, IL
7/6/2018 10:39 AM

  Hey, Bloomberg, in case you haven't noticed, soybeans are down about half since their high in 2012. And I suppose that is President Trump's fault too. Funny, I don't remember you lamenting that precipitous fall, or blaming then President Obama. I'm sure you can find an anonymous source to claim the President Trump has pulled the wings off of flies, or that he was mean to kittens and puppies also. I think your "Hate Trump" bias is showing. Trump derangement syndrome is an ugly disease.

Scotts, MI
7/6/2018 11:31 AM

  Phil,I think your love affair with Trump has affected your thinking. You talk about soybean high prices in 2012 as being common. Everyone knows it was related to a severe drought with corn going to over 8 bucks. This is 2018 and a much different situation. Beans were at 10.50 earlier in the year and then came the tariff talk and the drop of about two bucks. Now probably half of that could reasonably be attributed to good growing conditions, but Trump's tariff talk and actions have easily caused a dollar drop, not peanuts to farmers. I suggest you get off Bloomburgs back since they are spot on. Trade wars are no good and we are just getting started unless Trump comes to his senses.