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| Thanks for pointing out this site. The price collapse in 2004 caught my eye because it wasn't associated with any obvious weather event I was aware of. Looked it up and found that the extreme rise in prices was apparently due to soybean producers withholding beans from the market even as the Chinese placed very large orders. That producer boycott was effective until Oct 2004 when the size of the crop became apparent and producers suddenly flooded the market with beans.
My reason for plotting the recent price decline was to gain some insight as to where it might be going. As you can see, it seems that if the price decline continues it will intercept the $7.50 cash price on or about mid-July when the Chinese 25% tariffs take effect. What does that mean for Chinese buyers? Well, $7.50 x 25% is a $1.875 so presumably the Chinese will be paying $9.375 for US beans. It will be interesting to see if the Chinese come back into the market then.
Now if you average the price since Sept 29, 2014, roughly the beginning of the current price regime it comes out $9.76 which appears to be in the range of price for that historical period.
My question for you is this. The price of soybeans could have immediately declined to $7.50 following the Chinese announcement after all we know that Chinese buyers abruptly cancelled 120,000 MT of old orders and refrained from placing absolutely any new orders whatsoever.
But the price didn't immediately collapse. Instead it proceeded to decline in an almost straight line fashion to the $7.50 target price. My thought is that the market has to unwind all those deals predicated on $10 beans. You're more familiar with the options market. Do you have any thoughts as to the mechanism behind this price decline?
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Edited by farmer4321 6/30/2018 06:49
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Just coincidence or portends things to come.
