Despite the trade talks happening between U.S. and Chinese negotiators in Beijing this week, Ann Duignan managing director for JP Morgan says she sees more downside risk for soybeans than she sees upside potential.
“At the end of the day, exports are down 42%, this marketing year and the window of opportunity to export to China is closing quickly,” she told Chip Flory on AgriTalk. “With the negotiations going on this week there's high expectations that maybe the China would lift the tariff on soybeans and I’m kind of sitting here in New York scratching my head going, ‘who cares,’ the exports aren't coming back this marketing year, in our view, at least not the 42%.”
Duignan is admittingly more cautious than a lot of people including John Deere, AGCO and CNH Industrial.
“To me, soybeans have significantly more downside risk, an upside risk in my view,” she said.
Soybean prices are holding up because of the weather situation developing in South America, according to Flory.
“The lowest estimate that's out there on the market right now is 116 million metric tons from FC Stone, that's still too many soybeans that we're putting onto the supply side of the global balance sheet, and eventually the U.S. and Brazil are going to be looking to correct an oversupply situation at the same time,” he said. “To me, that feels like race to the bottom.”
Argentina's crop will be significantly better than last year’s, Duignan said adding they could choose to export those beans instead of crushing them.
"The sense I get is that things are going to take a step down before they take a step back up,” she said. “Even if we get some good news out of China this week.”