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| https://www.agweb.com/article/jerry-gulke-post-tariff-macro-implicat...
excerpts - SnD tables at AgWeb link
The assumption that China’s soybean demand was going to grow at a trendline of 5% to 8% per year
has been proven erroneous with clarification dependent on two other items.
Soybean prices for November 2019 recovered in January, to levels seen just before the tariffs
caused price deterioration. The chart below shows what-if scenarios regarding acreage reductions.
The average trade guess is a drop of 4 million acres. But, 6 million acres is possible,
and a 10-million-acre drop is necessary.
Even a return to slow global soy demand suggests taking at least three to four years
before U.S. stocks fundamentally support $10 beans again,
baring a weather shock reducing 500 million bushels in either hemisphere.
Prior to the tariff, July corn futures have tended to respect the $4-support level,
as there was the on-going concern to produce enough soybeans to supply
an ever-increasing Chinese demand.
Post tariff, that all changed. The $4 futures price has become overhead resistance,
as competing for acreage with soybeans has been thwarted.
It isn’t a matter of corn adding acres in 2019, it is a matter of how many acres of corn
move from beans to corn. A poor fall preparation of tillage and nitrogen application
as well as a 20% increase in nitrogen costs likely has more to do with acres than any other aspect.
A perceived yield reduction makes a 6-million-acre increase tolerable.
But only a 2-million-acre increase is not.
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Jerry Gulke: Post-Tariff Macro Implications
