Why Haven’t Soybean Futures Recovered?

As Brad Setser noted last month, US, Brazilian and Argentine soybean prices have converged, suggesting the end of arbitrage profits.

Yet, as shown in Figure 1, current prices have not recovered to the average of the past five years (only one year of which is from before the appreciation of the dollar).

Source: Barchart.com accessed 3/23/2019.

The Chinese tariff on US soybeans should open up a gap between US and non-US soybeans, if one can prevent arbitrage. If not, the prices should converge. However, soybean prices have not recovered. One hint is that China’s import demand has fallen, either through deliberate measures to switch to alternative feeds, and/or reduced feed demand due to African swine fever.

Source: Setser/CFR.

February imports were down 17% versus a year prior. With the ongoing flooding, the midwest’s farms woes will be compounding the depressed prices inflicted by the Administration’s policies.

One thought on “Why Haven’t Soybean Futures Recovered?

  1. Moses Herzog

    I say if Republicans want farm subsidies to save midwestern farmer bankruptcies in their districts, then they need to give Democrats something legislatively they want in return. If Republicans want a problem fixed they themselves created then they need to pay a penalty (not that senile Pelosi ever knew how to play that game correctly, senile Pelosi only ever knew how save Republicans’ bacon). And if I’m a Democrat, I make the import tariffs which precipitated the Chinese tariffs on U.S. exports one of my favorite campaign talking points, and drive it into the ground. Whoever is running against Steve King in Iowa might find it a useful topic to ask soybean and dairy farmers—if they are enjoying bankruptcies and defaults induced by those Republican induced tariffs on U.S. farm exports.

    Or maybe Iowa soybean and dairy farmers that are going bankrupt due to bad trumpian trade policy could just look around for some old racist bastard to throw some water on at one of their local restaurants. Either seems good to me. If a young kid from Colorado is smart enough to know how to treat an openly racist scum-lump, then Iowans should be smart enough to know how openly racist scum-lump should be treated.

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