While oil, coffee, gold, natural gas, wheat, and copper usually dominate the discussion of global commodities, soybeans have garnered more than their fair share of attention in recent months.
According to a recent Bloomberg radio feature, “Treasury Secretary Steven Mnuchin checks the price of soybeans every day.”
The reason, of course, is obvious.
Back on April 4, 2018, Bloomberg wrote,
Why has this taken on so much importance?
- China is, by far, the world’s largest importer of soybeans and the largest buyer of the U.S. soybean crop (worth $14 billion last year, according to Bloomberg).
- This aspect of the “tariff wars” is of prime concern to American farmers and politicians from the key soybean-producing states.
Since the proposed tariffs were announced, the price of soybean futures has declined about 20%.
FIGURE 1: COMMODITY FUTURES PRICE TREND FOR SOYBEANS
Source: nasdaq.com, price as of 7/23/18. Visit CME Group for contract specifications.
While the United States is currently the global leader in soybean production, according to Reuters, Brazil is poised take over that position in 2018.
The U.S. is expected to harvest 116.5 million tons of soybeans in 2018, says Reuters, “falling short of Brazil’s estimated collection of 117 million tons for its crop year that is just drawing to a close. … Brazil, already the world’s largest soybean exporter, is expected to expand this lead in the coming years thanks to its unique ability to expand planted area.”
The two countries account for more than 80% of the world’s exports (measured by dollar value), according to worldstopexports.com.
TABLE 1: TOP TEN SOYBEAN-EXPORTING NATIONS (2017)
China’s high demand for soybeans is primarily driven by the product’s use as a component of livestock feed, says an article posted at Quora by Wyatt Mingji Lim, co-founder at DefensePoliticsAsia.com:
FIGURE 2: COUNTRIES OF DESTINATION FOR U.S. SOYBEAN EXPORTS (2016)
IN MILLION METRIC TONS
FIGURE 3: VALUE OF U.S. SOYBEAN EXPORTS TO CHINA AND THE WORLD (1995–2016)
Sources: American Farm Bureau Federation, USDA
The Chicago Tribune recently ran an article discussing the impact of the “tariff wars” on Midwestern farmers. They said,
Donald Trump won the Electoral College vote in 2016 in eight of the top 10 soybean-producing states, with the notable exceptions of Illinois and Minnesota.
FIGURE 4: TOP SOYBEAN-PRODUCING STATES IN U.S. (2014–2017)
Last Friday (July 20), Politico wrote,
This week, according to The New York Times, the Trump administration will take steps to “ease the pain” for farmers. The publication reported on July 24,
The proposed programs, so far, have received mixed reviews.
CNN commented on July 25,
Telton Hall, CFP, RFC • Cedar City, UT Advanced Financial Planning LLC • Geneos Wealth Management Inc. Read full biography below Proactive Advisor Magazine: Telton, what motivated you to enter the financial-services industry? Coming out of college, I was blessed to...
“Every strategy works … until it doesn’t.” This market truism provides the rationale for diversification among dynamically risk-managed strategies in dealing with market uncertainty. ust read the financial...
o far this year, an estimated $1.2-plus trillion in corporate buybacks are scheduled, and this number may increase. Buybacks affect stock prices in several ways. Therefore, it is important for investors to...
Stephen Franklin, MBA, CFP, RICP, CFS, CEP • Louisville, KY Kentucky Planning Partners (KPP) • LPL Financial have been an independent financial advisor since 1984 and have always had a passion for...