A Look at Key Macro Factors Affecting Soybeans Pricing

Source: Forex News

Soybeans
is an important crop in the United States and China. The US is the largest
producer of the crop while China is the biggest importer. Therefore, when the
two countries get into conflict, the price of soybeans is usually the most
affected. In the past one year, the price has been under pressure as the US and
China have been engaging in a trade battle. This battle escalated last week
when the US implemented new tariffs on Chinese goods.

As
a result, a few things have been happening in the soybeans market. First, China
has been urging its farmers to plant more of it so that it can reduce the
dependence of the United States. As such, these farmers are expected to double
the output from the current 12 million tons within the next few years. This is
likely to affect the US soybean market in future.

Another
macro thing that is happening in China is the increasing population and wealth.
As the two have grown, so has the demand for meat. In fact, the annual
consumption of meat per person has increased from about 30 kgs to more than 50
kgs. As a result, the number of pigs in the country has increased greatly,
which has led to the increased demand for soybeans.

However,
this demand is now under pressure as the African swine fever spreads in the
country. This disease has led to the death of many pigs. Analysts expect that
more than 200 million swines could be killed this year to prevent the spread.
This will affect the demand of the soybeans.

Another
issue for soybeans is Brazil. Last year, Brazilian farmers had the best year
with volumes and prices up. However, in recent months, the price of the crop
has eased and farmers are questioning how long the good times may last. This may
happen as the swine fever disease spreads and the neighboring Argentina
increase its production. Last year, the country produced more than 35 million
tons, which are expected to increase by another 10 million this year. Also,
there was a severe drought in the regions that produce soy in Brazil.

Yesterday,
the price of soybeans rose after the trade fears eased. The price rose from a
low of $790 to a high of $840. On the chart below, this price is above the
25-day and 42-day moving averages. The RSI has moved slightly lower from the
previous overbought level. The price could continue moving upwards to test the
important resistance level of $850.

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