This week, financial market news has been relatively scarce. This is understandable since previous updates were quite intense, making the current news seem much milder. Although the overall market lacks notable developments, the agricultural products sector has seen significant news—particularly at a critical juncture for U.S. soybeans (post-June)—which inevitably demands attention.
While reviewing industry websites over the weekend, I realized that China-U.S. agricultural trade has been interrupted for a substantial period. China has not purchased U.S. soybeans for a long time. However, as the world’s largest soybean buyer, China’s recovering consumption means relying solely on purchases from Brazil and Argentina can no longer meet its demand. Back when China-U.S. trade was normalized, China sourced about 50% of its soybeans from the U.S., but now this figure has dropped to nearly zero, with Brazil and Argentina fully supporting the trade. Should the China-U.S. tariff issue be resolved, it would mark a gradual normalization of trade between the two nations, and China resuming imports of U.S. agricultural products would become a priority to ease domestic supply shortages.
China’s imports from the U.S. mainly include soybeans, corn, and cotton. Among these, soybeans receive the highest attention because China’s domestic production is mostly non-GMO soybeans, whose by-products are almost exclusively consumed directly by the Chinese population. In contrast, imported soybeans are genetically modified and primarily used for feed. Therefore, demand for imported soybeans is heavily influenced by the growth of Chinese consumer economy. Over the past two years, to counter potential economic deflation, China has continuously stimulated domestic consumption, which has started to show results and, in turn, increased feed demand in animal husbandry—thus widening the soybean demand gap. From this perspective, U.S. soybeans will be the primary beneficiary in the agricultural product sector in the near future, followed by U.S. corn.
From a technical standpoint, I warned last October that agricultural products were bottoming out, and looking back, that conclusion stands correct. However, fundamentals lack effective positive catalysts, and with favorable weather in producing areas and no unexpected events, prices have remained in a bottoming phase. In the second half of the year, we need to focus on whether China and the U.S. will finally reach an agreement on tariffs and whether China will restart imports of agricultural products. If so, U.S. soybeans will likely see a recovery rally. If not, prices will probably continue to trade near the bottom, with price movements shifting to soybean by-products.
If U.S. soybeans continue to consolidate at the bottom, this means no overall trend will form. However, crushing plants, aiming to maximize profits, will still adjust prices of by-products according to their demand. For example, currently, soybean oil is supported by bioenergy policies and is performing much better than soybean meal. When soybean oil prices get too high and demand slackens, oil mills reduce production to push up soybean meal prices, thereby balancing profits. So although soybean meal prices are currently weak, when the rebound comes, it will be swift—but patience is required. $Wheat - main 2509(ZWmain)$
$Soybeans - main 2511(ZSmain)$ $Corn - main 2512(ZCmain)$ $Gold - main 2508(GCmain)$ $E-mini S&P 500 - main 2509(ESmain)$
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