Soybeans bounce back as China trade talks move forward

Soybeans are snapping out of a slump as officials signal optimism that the U.S. and China will reach a trade deal.

Futures are up 1.4% this week in Chicago, heading for the first such gain in more than a month. Prices had been floundering near a two-month low as the two nations appeared at an impasse in negotiations, which may prove key to future demand for American farm goods such as soybeans.

The countries are working toward a deal before a Dec. 15 deadline for more tariffs, and U.S. National Security Adviser Robert O’Brien said that Washington is close to reaching a phase-one agreement. In another positive sign, China started to process applications from some domestic companies to exempt purchases of U.S. goods including soybeans and pork from retaliatory tariffs.

“It remains to be seen how quickly soybean imports from the U.S. recover if a ‘Phase 1 trade deal’ is agreed,” Carsten Fritsch, an analyst at Commerzbank AG, said in a report.

Soybeans for January delivery gained 0.5% to $8.8875 a bushel in Chicago, climbing for a fourth straight day. Soybean meal futures are also headed for the biggest weekly gain since June, lifted partly by news that a key Argentine crop shipper has been caught in a financial bind.

Even with the recent rebound, soybean prices remain slightly lower for the year -- on pace for a third straight annual loss. Large South American harvests loom in the coming months, boosting competition for American supplies. The U.S. Department of Agriculture will update its global crop forecasts next week, and analysts expect slightly bigger outlooks for both Brazil and Argentina.

Other oilseed prices have also had strong gains this week. Palm oil hit a fresh two-year high on Friday as supply slows and Indonesia and Malaysia boost biofuel programs. Rapeseed futures in Paris are also trading at the highest since 2017. The European Union’s rapeseed imports have surged after the smallest harvest in a decade, and parts of the bloc have already faced difficult conditions for 2020 crops.