Commodities are feeling the pangs of a market correction, but as seasoned traders are well aware, it could just be the normal market playing itself out after rising commodity prices dominated the first half of 2022. There are some tailwinds that could keep certain commodities like soybeans elevated.
One of the forces propping up soybean prices will be demand specifically in China. A drop in tariffs could help boost more soybean purchases, thus increasing demand and then prices as the normal economic forces play out.
“China is back in the market headlines for soybeans once again,” said Betsy Jensen, Northland Farm Business Management and a producer/marketer from Stephen, Minn. “There’s news of potential drops in tariffs, and we think China’s soybean crop isn’t going to be as good. So even though the soybean market has not been performing very well for farmers lately, there is hope that demand will remain strong for 2022-23. There’s a small glimmer of hope in the soybean market."
However, the tailwinds for soybean prices could be muted, according to the U.S. Department of Agriculture.
“Unfortunately, it does look like USDA might need to cut their export projections for old crop soybeans,” Jensen added. “We’re running out of time and we are not keeping up with where we were a year ago. So it does look like USDA may be able to add a few bushels on to our old crop balance sheet."
No Immediate Concern Among Traders
The good news for bullish soybean investors is that there appears to be no concern among traders. If their bets are correct, then more bullishness could be ahead at least through 2023.
“The good news is that traders are not real concerned. They’re focus is on the 2022-23 balance sheet at this time,” Jensen added. “Export sales have started to slow, but we do hope that there will be additional export sales in the 2022-23 marketing year.”
One fund to consider is the Teucrium Soybean Fund (SOYB ). SOYB can offer similar exposure to what investors could obtain by trading in soybean futures contracts themselves.
For investors looking at ways to mute the impact of inflation, commodities may also be beneficial for inflationary periods, according to experts, making them a valuable hedge against the recent surge in the prices of goods and services over the past year.
For more news, information, and strategy, visit the Commodities Channel.