• The ongoing trade war between the US and China has escalated again, with Friday's session showing an extended selloff by soybean futures. 

• Some still argue this is actually good for the US market, and that other countries will pick up the slack when it comes to US exports, though evidence suggests otherwise. 

• Many fundamental factors stand out to me, including the fact the basis market remains weak despite the breakdown of the futures market.

The trade war between the US and China continues to heat up, as expected, with the latest salvo being China is reportedly set to put a retaliatory 34% tariff on all US goods. It doesn’t take much imagination to conjure up an idea of what markets look like Friday morning (April 4). Yes, they are all decked out in red hats. A look at the morning’s Barchart Futures Market Heat Map shows the only sector in the commodity complex wearing green is Financials (US Treasury futures). To no one’s surprise, it seems Warren Buffett was right again with his reported sale of stocks and move to cash. 

But given the well-known mantra, “Trade wars are good, and easy to win”, the question in the Grains sector remains, “Has the US soybean market been made great again?” It’s a difficult question, a subjective question, with the answer usually based on which side of the political aisle one sits on. That being said, there are some facts that might shed light on the reality of the situation: 

First: Since the last week of October, the pace projection of US export shipments of soybeans has been steadily declining. What I mean by this is if we take total reported shipments from the weekly sales and shipments update and divide that number by the average percent shipped for the marketing year for that week (also found in the same report), it gives us a pace projection for total marketing year shipments. The last week of October 2024 this projection was 2.035 bb. The last week of March the projection had decreased to 1.833 bb, down about 200 mb or roughly 10%. Furthermore, from the second week of January’s 1.954 bb the projection is down about 120 mb. I think we all know what these weeks are tied to.

Second: At the end of the 2014-2015 marketing year the US reportedly shipped 50.14 million metric tons of soybeans, approximately 99% of Brazil’s reported 50.61mmt. After the trade war between the US and China erupted and was formally declared on social media on January, US soybean shipments dropped to as little as 44% of Brazil’s soybean exports, again reportedly, at the end of the 2023-2024 marketing year. This isn’t just exports to China, the world’s largest buyer, but total exports. 

Third: At the end of March the National Soybean Index ($CNSI) was priced at $9.54, putting available stocks-to-use (based on the economic Law of Supply and Demand) at 17.2%. This was the largest available stocks-to-use figure since 2020’s 23.3%. It’s interesting to note how end of marketing year available stocks-to use have changed over the past decade and a half, with the figure hitting a high of 30.4% at the end of 2017-2018 (August 2018). If this week ends with the Index down 32 cents it would be near $9.20, what would be the lowest monthly close since August 2020. (Granted, there is a lot of the month of April remaining.) It would also put this week’s available stocks-to-use figure at 19%. Let’s see how the day plays out. 

Fourth: The May futures contract (ZSK25) is in the lower percentages of it’s the market’s (nearby futures contract) price distribution range for a variety of time periods. What I mean by this is based on closing prices over the past 1, 3, 5, and 10 years, the nearby futures contract doesn’t spend much time below the $9.78 mark the May 2025 issue is showing Friday morning. We’ll see if the low price proves attractive to buyers, or if other factors trump the theory behind the price distribution filter (Rule #3: Use filters to manage risk.)

Fifth: National average basis remains weak. The National Soybean Index was priced 59 cents below the May futures contract and 73.75 cents below July Thursday (April 3) evening. The previous 5-year low weekly close for this week is 60.0 cents under May while the previous 10-year low weekly close for the first week of May is 73.0 cents under July futures. What does this indicate? If demand is still solid, basis tends to firm when the futures market falls as merchandisers support the cash price trying to source supplies. If basis remains weak with the futures market in the lower percentages of its price distribution range, there is little to no push for ownership by commercial traders. 

You can now make up your own mind regarding the original question, “Has the US soybean market been made great again?” by the escalating “good and easy to win” trade war.