Soybeans Rises Buoyed by Optimism on Trade and Supply Cuts

On Friday, the Department of
Agriculture released the World Agricultural Supply and Demand Estimates
(WASDE). This was the first report of the year because in January, the
government was shut down. This is an important report to agricultural traders because
it gives them details about the demand and supply expectations. With this
knowledge, the traders may easily allocate capital in a good way. If the demand
is forecasted to increase, it would mean that the price will rise. An increase
in supply on the other hand means that the price could drop.

After the report on Friday, the
price of soybeans have edged up from a low of $9.05 to a high of $9.20. The
increase in the price was mostly because of the geopolitical issues between the
United States and China. The two countries are currently negotiating a trade
deal that may help reduce the tensions that have been in place for the next two
years. Yesterday, Donald Trump said that he will be open to extending the March
1 deadline that he put in place for the Chinese talks. This was viewed as being
positive for soybeans because it is a signal that the negotiations are going on
well. In addition, according to the WASDE report, there is a possibility that
this year’s production of soybeans may be lower than what analysts were
expecting. The statement said

The 2018/19 global soybean outlook includes lower production, exports,
crush, and stocks. Global soybean production is lowered 8.2 million tons to
361.0 million with lower crops for Brazil, Argentina, Paraguay, Uruguay, and
South Africa. Production for Brazil is lowered 5 million tons to 117 million
due to dryness in parts of the South and Center-West regions. Production for
Argentina is lowered 0.5 million tons to 55 million due to a reduction in
harvested area that is partly offset by increased yields. Global soybean
exports are reduced 1.7 million tons to 154.4 million. Lower exports for
Brazil, Uruguay, and Paraguay are partly offset by higher exports for
Argentina. Global imports are also reduced mainly on a 2-million-ton reduction
for China due to lower crush demand.

The chart below shows the upward
momentum on the price of soybeans. The price remains between the channel where
it was a few days ago. The price will likely continue the upward momentum until
it tests the important resistance level of $9.30.

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