Soybeans is an important crop in the United States and China. The US is the largest producer of the crop while China is the biggest importer. Therefore, when the two countries get into conflict, the price of soybeans is usually the most affected. In the past one year, the price has been under pressure as the US and China have been engaging in a trade battle. This battle escalated last week when the US implemented new tariffs on Chinese goods.
As a result, a few things have been happening in the soybeans market. First, China has been urging its farmers to plant more of it so that it can reduce the dependence of the United States. As such, these farmers are expected to double the output from the current 12 million tons within the next few years. This is likely to affect the US soybean market in future.
Another macro thing that is happening in China is the increasing population and wealth. As the two have grown, so has the demand for meat. In fact, the annual consumption of meat per person has increased from about 30 kgs to more than 50 kgs. As a result, the number of pigs in the country has increased greatly, which has led to the increased demand for soybeans.
However, this demand is now under pressure as the African swine fever spreads in the country. This disease has led to the death of many pigs. Analysts expect that more than 200 million swines could be killed this year to prevent the spread. This will affect the demand of the soybeans.
Another issue for soybeans is Brazil. Last year, Brazilian farmers had the best year with volumes and prices up. However, in recent months, the price of the crop has eased and farmers are questioning how long the good times may last. This may happen as the swine fever disease spreads and the neighboring Argentina increase its production. Last year, the country produced more than 35 million tons, which are expected to increase by another 10 million this year. Also, there was a severe drought in the regions that produce soy in Brazil.
Yesterday, the price of soybeans rose after the trade fears eased. The price rose from a low of $790 to a high of $840. On the chart below, this price is above the 25-day and 42-day moving averages. The RSI has moved slightly lower from the previous overbought level. The price could continue moving upwards to test the important resistance level of $850.