FxWirePro: Soybean price remains unimpressed despite China’s pledge to buy more

China buys more or not, Soybean price remains unimpressed. Unfazed by promises of big-ticket purchases.

• To appease President Trump’s concerns over U.S. farmers, China has offered to buy more Soybeans from U.S. farmers, as much as 5 million tons. However, that doesn’t seem to impress Soybean bulls.
• Over the past three months, the price of Soybean has been moving in a tight range, despite China’s pledge to buy more. In the past three months, the price has moved between 880 cents per bushel and 930 cents per bushel.

Why is that?

• First of all, China’s purchase is sizable as the order is worth $1.7 billion (approx.). No matter how great the number is, that is minuscule compared to China’s good surplus of $375 billion per year. So, such purchases unlikely to smoothen the path of an agreement.
• Naturally, U.S. trade representative Robert Lighthizer pointed out earlier this week that the United States is not looking for just big-ticket purchases but structural reforms on how China deals with the United States and its handling of U.S. intellectual properties.
• But, more importantly, the size of the purchase remains minuscule compared to China’s appetite for Soybeans. In 2017 alone, China imported $25.7 billion worth of Soybeans. Hence the size of the purchase is relatively small.

The price of Soybean is currently trading at 913 cents per bushel.