Export premiums for soybean are at their highest in 14 months in the US as traders rush to ship out record harvests ahead of the US elections.
Traders are shipping out soybean as they fear renewed trade-related issues with China.
According to the US Department of Agriculture, nearly 2.5 million tons of soybeans were inspected for exports last week.
Out of this 1.7 million tons were bound for China, the most in a year.
Export demand may fizzle out
Experts believe that US farmers have been dealing with low soybean prices for a while at a time when prices are near four-year lows.
The flurry in export demand is likely to be short-lived as there are plenty of stocks in the market.
US soybean futures fell to a low of $9.68 per bushel earlier this month, which is its lowest level since August. Overall, prices remain near four-year lows.
At the time of writing, the price of soybean in the US market was at $9.811 per bushel.
Chinese importers shift to Brazil amid US tariff threat
The US Presidential hopeful Donald Trump has threatened to impose tariffs on soybean exports to China if he comes to power.
The uncertainty ahead of the elections weigh on the soybean market as well.
Threat of tariff imposition has prompted some Chinese importers to shun US soybeans from January onwards, analysts told Reuters.
“Instead, these buyers are booking Brazilian soy – and paying up to 40 cents a bushel more than they would in the United States in an earlier-than-normal seasonal shift that’s shrinking the U.S. export window,” according to the Reuters’ report.
Dan Basse, president of AgResource Co., told Reuters:
The Chinese don’t know what final costs will be relative to tariffs. They are avoiding the United States from January forward.
What will be China’s response?
It is unclear what will be China’s response if Trump imposes higher tariffs on soybean exports to the Asian giant.
Additionally, Trump has vowed to boost tariffs on Chinese products to around 60%, while the other Presidential candidate Kamala Harris plans to keep them more or less the same.
Terry Reilly, senior agricultural strategist with Marex was quoted by Reuters in a report:
There’s a threat of tariffs from either party, but more so under a Trump administration.
With Harris, there’s a real possibility that things will revert to the status quo.
Premiums to decline in coming weeks
Traders have said that export premiums on soybeans are likely to decline in the coming weeks.
Demand for soybean in the short-term is balanced by adequate supply.
If the trade war with China continues, it will be difficult for exporters to get rid of the record harvest of soybeans this year, according to traders.
A trade war between the two top economies in the world would also limit the buying of the commodity.
Cash premiums for soybean barges delivered to Gulf export terminals by midweek spiked to a 130-cent premium over Chicago Board of Trade November futures on Monday, reflecting strong demand for immediate supplies, Reuters said in the report.
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