Are $3 Beans Possible if Trade Talks Fail?

AgriBusiness 11-07
Soybeans at risk of lower prices based on pending talks ( FJM )

China and the U.S. could be bringing a thaw to the trade war during the G20 summit in Argentina later this month. China's President, Xi Jinping, saying a deep exchange of views is expected at the meeting. He met with former U.S. Secretary of State Henry Kissinger. After that meeting, Xi said that China wants to resolve differences with the U.S. but that America has to respect China's development path and interests. 

How those meetings and discussions go will likely set the tone for soybean prices in the next few months. Market analyst Bill Biederman tells AgDay TV host Clinton Griffiths if talks are positive soybeans could jump higher.

"We definitely move higher quickly," says Biedermann. "World buyers jump in to try and buy that big discount in the United States."

Biedermann says at current prices buyers can make in the neighborhood of a dollar a bushel over freight costs. 

"That would happen right away and it would drive prices higher," says Biedermann. "Our farmers aren't going to be in any hurry to sell."

He says many farmers have already decided to store soybeans and getting those out and to the market may take more enticement. Others may simply need the cash this season.

"You know if you're selling now it would probably be a good idea to try and find a cheap option to buy," says Biedermann. "So just set yourself up for if this actually does work out then you're ready." 

On the other hand, if the trade talks go south Biedermann says beware.

"The first thing that happens is your carryover is realistically going to get revised to about 1.2 billion bushels," says Biedermann. "That's like corn doesn't that mean we go to three dollar beans?"

Biedermann isn't sure if $3 dollar beans are possible but he does believe continued tensions create a long-term issue for American farmers. 

"It sets you up for the years to come because China won't come back," says Biedermann. 

Find out what strategy Biedermann thinks could help protect prices for this scenario in the video above.