Soybeans Slump to Lowest in a Decade as Trade War Intensifies

(Bloomberg) -- Soybean futures fell to the lowest level in a decade as an escalating trade war between the U.S. and China dims hopes that the Asian nation will resume purchases of American beans to ease supply gluts.

Farm commodities from pork to cotton slumped on Monday, with soybeans dipping below $8 a bushel for the first time since 2008 in Chicago, after China said it will raise tariffs on some U.S. goods starting June 1. Agribusiness shares including Archer-Daniels-Midland Co. and Bunge Ltd. also retreated.

Flaring trade tensions between the U.S. and China, the world’s top importer, has roiled the outlook for soybean demand as American farmers sow the next crop. China bought several rounds of soybeans earlier this year as goodwill gestures in the trade talks.

“Clearly, there’s uncertainty about where we’re going from here,” said St. Louis-based independent analyst Ken Morrison. “Both parties have backed themselves into a corner.’’

The breakdown in negotiations also makes it more likely that some purchases of U.S. goods such as soy and pork might be canceled before delivery, Morrison said. China has purchased about 7.4 million metric tons of U.S. beans that have not yet been shipped, according to U.S. Department of Agriculture data.

The latest negotiations between the two countries ended without a resolution, prompting President Trump last week to pledge American crop purchases to offset the slower sales to China. Still, it’s unclear how far that would go to solve the current supply overhang.

The conflict comes as African swine fever plagues hog producers in China and nearby countries, with pig losses in Vietnam now totaling about 4% of its domestic herd. The spreading fever may further curb demand for soybeans and other livestock feeds.

American farmers are struggling as the tariff spat that started a year ago curbed soybean exports, sending prices tumbling and hurting grower incomes. The escalation in tensions dashes hopes of a quick deal and puts the focus back on well supplied markets.

On Friday, the U.S. Department of Agriculture released its closely watched monthly crop outlook, forecasting rising domestic stockpiles in its first guidance for the upcoming season.

“The USDA report has been quite bearish last Friday and has added to the gloomy atmosphere in place on agricultural commodities due to the endless and tense trade discussions between USA and China,” Agritel said in note.

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