July 24, 2018 / 4:38 PM / a month ago

Soy jumps as U.S. readies aid for farmers hurt by trade disputes

CHICAGO (Reuters) - U.S. soybean futures climbed to two-week highs on expectations the Trump administration would announce an aid program on Tuesday to help protect American farmers from economic pain stemming from trade disputes.

A farmer uses urea fertilizer in his cornfield in La Planche near Nantes, France, June 5, 2018. REUTERS/Stephane Mahe

Under a White House plan, which has yet to be announced, $12 billion in assistance will be disbursed to farmers through direct assistance, a food purchase and distribution program, and a trade promotion program, according to the Washington Post.

A food purchase program indicates the government will buy crops from farmers, said Charlie Sernatinger, global head of grain futures at broker ED&F Man Capital in Chicago. This helped lift soybeans prices, he said, after the market neared a 10-year low last week over concerns about the U.S.-China trade fight reducing demand for American soy.

“You take surplus grains off the market, what do you think is going to happen? Higher prices,” Sernatinger said.

A farmer prepares to use urea fertilizer in his cornfield in La Planche near Nantes, France, June 5, 2018. REUTERS/Stephane Mahe

The most actively traded soybean contract rose 1.1 percent to $8.72 a bushel at the Chicago Board of Trade by 11:20 a.m. CDT (1620 GMT) and reached its highest prices since July 10. Corn slipped 0.9 percent to $3.68 a bushel, and wheat fell 0.6 percent to $5.10-3/4 a bushel.

The United States and China have imposed tariffs on $34 billion of each other’s imports and U.S. President Donald Trump on Friday said he was ready to slap tariffs on all $500 billion of imported Chinese goods.

The USDA did not immediately comment on aid for farmers.

The administration’s plan signals that trade tensions will drag on, which is bearish for crop prices over the longer term, said Brian Hoops, president of broker Midwest Market Solutions in Missouri.

“If they’re willing to do that, there’s no quick resolution coming,” Hoops said.

A farmer prepares to use urea fertilizer in his cornfield in La Planche near Nantes, France, June 5, 2018. REUTERS/Stephane Mahe

However, expectations for an announcement on Tuesday prompted soy traders to buy back previously sold positions, or offset bets that prices will fall, Hoops said.

“Why worry about protecting the downside when the government is giving it to you for free?” he said.

China implemented a tariff on imports of U.S. soybeans on July 6, after threatening to do so for weeks. The tensions prompted Chinese buyers to load up on soybeans from Brazil, instead of the United States.

The shift has pressured U.S. soy prices, increasing demand from buyers such as Pakistan, and raised premiums in Brazil.

“Right now all non-China business for soybeans is coming to the United States,” said Arlan Suderman, chief commodities economist for brokerage INTL FCStone.

Additional reporting by Michael Hirtzer in Chicago, Michael Hogan in Hamburg, Naveen Thukral in Singapore, editing by David Evans and Tom Brown

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