Typically, Chinese purchases of American soybeans picks up in the autumn, due to timing of harvests. If this is an important factor in the recovery of US soybean prices, one would expect futures for November delivery of soybeans would reflect that fact. As of today, they don’t.
Figure 1: Soybean futures for November delivery, accessed as of 25 June 2018. Source: ino.com.
Some commentators have tried to explain recent movements in front month futures as a function of new information regarding weather and general demand conditions. In this post, I discuss the fact that futures prices have moved down along the entire curve, from front month to back month, suggesting current weather conditions were unlikely to be prime driver. (By the way, a mere 10 days ago, as noted in this post, the November price was over $30 higher).
This suggests to me that in the absence of a dramatic reversal of the trajectory in US-China trade relations, the soybean producers of America will sustain a negative impact to their income stream this year. It is possible Mr. Trump could direct USDA to bail out farmers, although this would not be costless to the US Treasury.
I hope Mr. Trump will also consider a bailout of US dairy farmers should all the dairy tariffs come into place. Also, I think the motorcycle industry needs a bailout. Or protection. Should Chinese retaliation strike the US wide-body jet industry, I hope Mr. Trump will also intervene there. There is also the question of how US corn/maize sales will be impacted if the US should withdraw from Nafta; I hope Mr. Trump will also consider bailing out the corn farmers of the US, who through no fault of their own will be suffering depressed prices…
Question: Are we winning yet?