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Soybean ETF Surges After a Harrowing Month

This article was originally published on ETFTrends.com.

Soybean prices and a related soybean ETF have plunged over the past month on prospects of reduced exports to China in the ongoing trade war spate, but soy jumped Friday after hitting contract-lows.

The Teucrium Soybean Fund (SOYB) jumped 4.2% Friday, with CBOT corn futures up 2.4% to $3.6075 per bushel, according to Bloomberg. Nevertheless, SOYB is still down about 11% since June.

U.S. new-crop soybean prices pushed higher Friday after dipping to contract-lows earlier on the ongoing trade war between Washington D.C. and Beijing.

"The soybean market has largely factored in Chinese tariffs. We expect Brazilian soybeans premium to rise further when the tariffs start," according to one India-based agricultural commodities analyst, Reuters reports.

U.S. tariffs on $34 billion in Chinese imports took effect as of Friday, and Beijing vowed to respond immediately in kind. China is expected to raise tariffs on U.S. soy to a level that is expected to curb Chinese demand for U.S. shipments.

Soybean Price Gap

China has increased demand for Brazilian soy as an alternative, which has caused the price gap between U.S. soy and Brazilian beans to more than triple since the end of May.

"Premiums reflect the rising possibility of China being more dependent on Brazil’s soybeans," Luis Fernando Roque, an analyst at consultancy firm Safras & Mercado, told Bloomberg.

Nevertheless, weekly export sales reveal higher soybean exports ahead of newly imposed Chinese tariffs. Soybean export sales was 20.6 million bushels in old crop sales, plus another 16.9 million bushels in new crop sales for a total of 37.5 million bushels, or just above the prior week’s sales of 36.8 million bushels and moderately higher than trade estimates of 23.9 million bushels, according to FarmFutures.

Related: Why Trade Policy Won’t Affect Long Term Price of Soybeans

Soybean export shipments hit 42.3 million bushels, or 87% higher than the prior week and bested the four-week average by 49%. China was not on the list of destinations.

“China cancelled more sales ahead of tariffs that went into effect today, taking 134.5 million bushels off the books, while accepting a scant 52,000 bushes, one cargo’s worth,” Farm Futures senior grain market analyst Bryce Knorr said. “China now accounts for only 49% of total U.S. soybean commitments; normally the figure is 57% to 62%. Total U.S. sales and shipments to China are down 22% year-to-date.”

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