Soyabeans, a commodity sensitive to the state of Sino-US relations, have fallen below $8 a bushel for the first time since the financial crisis as uncertainty rises over trade talks between Washington and Beijing.
A sharp slide in the price of the oilseed came alongside a broader sell-off in financial markets on Thursday, with US stocks down about 1 per cent at midday and long-term US government interest rates tumbling below short-term rates, in a sign investors were concerned about the economic outlook.
The Trump administration’s plan to raise tariffs on more Chinese goods this week have undermined hopes of a deal and sparked the sell-off.
China has steadily grown to become the world’s largest importer of soyabeans, crushing them into meal to feed pigs and poultry. The US has historically sold the majority of its soyabean exports to China, a business worth $12bn a year.
China imposed a 25 per cent tariff on US soyabeans last July in retaliation for new US duties on its goods, targeting farmers in rural states where a majority voted for Donald Trump as president. The impediment halted US soyabean exports to China for months, until a resumption of trade talks in December led China to make about 13m tonnes of goodwill purchases.
An escalation of the trade war threatens to block those volumes, just as farmers hold record stocks of soyabeans.
“The unresolved trade issue with China is hanging over the market. That is the 800lb gorilla,” said Michael Cordonnier, president of Soybean & Corn Advisor, a consultancy in Illinois.
Soyabeans for May delivery fell as much as 2.3 per cent to $7.95¼ a bushel on the Chicago Board of Trade, the lowest price for a near-month contract since December 2008. All futures contracts fell, with soyabeans deliverable after the US harvest in November dropping to $8.30 a bushel.
Most farmers cannot break even at such prices. An Iowa State University analysis estimated costs per bushel for the most commonly planted soyabean varieties at between $8.86 and $9.21.
“More customers are realising that their current financial position may not allow them to continue in the future,” a Nebraska banker told researchers at the Federal Reserve Bank of Kansas City in an agricultural credit survey released on Thursday.
The low prices may discourage some soyabean planting, though most US farmers have already bought inputs for the year. Already six per cent of the US soyabean crop has been sown, according to the US Department of Agriculture.
Soyabean markets face other challenges. The spread of African swine fever, a disease deadly to pigs, has led to mass culling in China, for example.
“With the sharp decline in pig inventories, the exponentially rising import trend, especially of soyabeans, over the past two decades could come to an abrupt halt,” Josef Schmidhuber, an analyst at the UN Food and Agriculture Organization, wrote in a report published on Thursday. The FAO estimated China’s use of oilseed meals and cakes would decline to 98.4m tonnes from 101.5m this year.
Meanwhile, Brazil’s agricultural statistics agency on Thursday raised its estimate for the country’s soyabean production to 114.3m tonnes, a large crop.
“There’s a lot of big headwinds,” Mr Cordonnier said.