On Friday, the Department of Agriculture released the World Agricultural Supply and Demand Estimates (WASDE). This was the first report of the year because in January, the government was shut down. This is an important report to agricultural traders because it gives them details about the demand and supply expectations. With this knowledge, the traders may easily allocate capital in a good way. If the demand is forecasted to increase, it would mean that the price will rise. An increase in supply on the other hand means that the price could drop.
After the report on Friday, the price of soybeans have edged up from a low of $9.05 to a high of $9.20. The increase in the price was mostly because of the geopolitical issues between the United States and China. The two countries are currently negotiating a trade deal that may help reduce the tensions that have been in place for the next two years. Yesterday, Donald Trump said that he will be open to extending the March 1 deadline that he put in place for the Chinese talks. This was viewed as being positive for soybeans because it is a signal that the negotiations are going on well. In addition, according to the WASDE report, there is a possibility that this year’s production of soybeans may be lower than what analysts were expecting. The statement said that:
The 2018/19 global soybean outlook includes lower production, exports, crush, and stocks. Global soybean production is lowered 8.2 million tons to 361.0 million with lower crops for Brazil, Argentina, Paraguay, Uruguay, and South Africa. Production for Brazil is lowered 5 million tons to 117 million due to dryness in parts of the South and Center-West regions. Production for Argentina is lowered 0.5 million tons to 55 million due to a reduction in harvested area that is partly offset by increased yields. Global soybean exports are reduced 1.7 million tons to 154.4 million. Lower exports for Brazil, Uruguay, and Paraguay are partly offset by higher exports for Argentina. Global imports are also reduced mainly on a 2-million-ton reduction for China due to lower crush demand.
The chart below shows the upward momentum on the price of soybeans. The price remains between the channel where it was a few days ago. The price will likely continue the upward momentum until it tests the important resistance level of $9.30.