In recent months, the focus on the price of soybeans has revolved around tariffs and the ongoing trade war. Investors believe that the ongoing trade war will reduce the imports of soybeans from the United States. Indeed, the amount of soybeans in storage the US has increased as imports from its biggest customer have reduced. At the same time, imports from other countries like Brazil have increased.
As the talks between the United States and China have restarted, the price of soybeans has seen an upward trend. Indeed, in the past one month, the price of soybeans has risen by more than 1%. This is because traders believe that a deal between the two countries will happen. If it does, China has already indicated that it will increase the purchases from the United States.
Even with this optimism, investors appear to be ignoring a major issue that is currently going on in China. Last year, the outbreak of African Swine Fever emerged and to date, thousands of hogs have died. China has more than 400 million hogs. The disease is highly contagious and can spread by dead and live pigs. Soybeans is crushed in the production of oil and animal feed, with Chinese hogs being the biggest consumers. Therefore, since the disease is hard to control, there is a likelihood that it will lead to more deaths, which may affect the demand of the soybeans.
This month, the price of soybeans has moved higher to an intraday high of $926 as shown in the chart below. Since then, the price has eased a bit and has moved to the lower line of the 20-day moving average channel. Even with the swine fever problem, there is a likelihood that the price of the beans will continue moving up. This is because investors will continue focusing on the issue of trade. If it does, it will likely test the important level of $1000 this quarter.