Get started
Soybean FuturesSoybean FuturesSoybean Futures

Soybean Futures

No trades
See on Supercharts
Overview News
Ideas
Discussions Technicals Forward curve Seasonals Contracts

TGSB1! trade ideas

Soybeans Treading Near Significant Levels Soybeans Seasonal Trends in Play: Short November soybeans from 7/1-8/31. This has been profitable for 13 of the last 15 years with the average gain being roughly 40 cents, or $2,000 per one 5,000-bushel contract. Fundamentals: Yesterday's weekly Crop Progress report showed good/excellent conditions at 63%, this is a 2% drop from last week and 1% lower than expectations. Compared to last year, that number is 4% better. 3% of the crop is setting pods and 16% is blooming. Weekly export inspections came in at 354,987 metric tons, below the range of estimates. Technicals: Soybeans got taken to the woodshed yesterday, breaking below the 200-day moving average and the 50% retracement. That forms a pocket form 1452-1457. If the Bulls can chive a close back above this pocket, we could see an attempt at filling the gap from yesterday's open, that comes in from 1495-1505. A failure to close back of this pocket could keep the selling pressure on. There's been significant technical damage done over the last few weeks, so a rally would likely just be relief in a downward trending market. Our bias remains in bearish territory, despite the high probability of a decent relief rally. Bias: Neutral/Bearish Previous Session Bias: Neutral/Bearish Resistance: 1495-1505****, 1560-1566***, 1592-1597*** Pivot: 1452-1457 Support: 1413 3/4-1424 1/4***, 1400-1403**** Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
CBOT:ZSQ2022
by OliverSloup_BlueLine
Soybeans Retreat to the 200-Day Moving Average Soybeans Commitments of Traders Update: Friday’s CoT report showed Managed Money were net sellers of 29,914 futures/options contracts through June 28th. Majority of this was long liquidation, 26,432 contracts. This shrinks their net long position to 124,498 futures/options. Fundamentals: Late last week there were rumors circulating that 8 cargoes of soybeans were cancelled; this would certainly help explain the extensive selling we saw on Friday. Scattered rains over the weekend may help prices see some continuation of long liquidation. Technicals: The big drop on Friday was ugly on the screen, especially when considering the reversal on Thursday off resistance near $16.00. The market finished roughly 90 cents off those Thursday highs and are now threatening to take out the recent lows1494 ¾-1500. A break and close below here would open the door for a run at the 200-day moving average, 1456. Bias: Neutral/Bearish Previous Session Bias: Neutral/Bearish Resistance: 1560-1566***, 1592-1597*** Pivot: 1533 ½ Support: 1494 ¾-1500****, 1456** Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
CBOT:ZSQ2022
by OliverSloup_BlueLine
Soybean Mini Futures (XK1!), H1 Potential for Bearish DropType : Bearish Momentum Resistance : 1580'4 Pivot: 1495'1 Support : 1420'2 Preferred Case: On the H1, with price moving below the ichimoku cloud and along a descending trendline , we have a bearish bias that price will drop to the pivot at 1495'1 in line with the swing low support. Once there is downside confirmation of price breaking pivot structure, we would expect bearish momentum to carry price to the 1st support at 1420'2 where the 161.8% fibonacci extension and 61.8% fibonacci projection are. Alternative scenario: Alternatively, price may rise to the 1st resistance at 1580'4 where the overlap resistance and 38.2% fibonacci retracement are. Fundamentals: Since both countries, Russia and Ukraine, are major exporter of agriculture goods and their persistent war will lead to a shortage of agricultural goods and give us a bullish bias for soybean .
CBOT_MINI:XK1!
by Tickmill
Soybean Mini Futures (XK1!), H1 Potential for Bearish DropType : Bearish Momentum Resistance : 1580'4 Pivot: 1495'1 Support : 1420'2 Preferred Case: On the H1, with price moving below the ichimoku cloud and along a descending trendline , we have a bearish bias that price will drop to the pivot at 1495'1 in line with the swing low support. Once there is downside confirmation of price breaking pivot structure, we would expect bearish momentum to carry price to the 1st support at 1420'2 where the 161.8% fibonacci extension and 61.8% fibonacci projection are. Alternative scenario: Alternatively, price may rise to the 1st resistance at 1580'4 where the overlap resistance and 38.2% fibonacci retracement are. Fundamentals: Since both countries, Russia and Ukraine, are major exporter of agriculture goods and their persistent war will lead to a shortage of agricultural goods and give us a bullish bias for soybean .
CBOT_MINI:XK1!Short
by Genesiv
Soybean Futures (ZS1!), H1 Potential for Bearish DropType : Bearish Momentum Resistance : 1579'0 Pivot: 1495'2 Support : 1426'0 Preferred Case: On the H1, with price moving below the ichimoku cloud , we have a bearish bias that price will drop to the pivot at 1495'2 in line with the swing low support. Once we have downside confirmation that price has broken past pivot structure, we would expect bearish momentum to carry price to the 1st support at 1426'0 where the 161.8% fibonacci extension and 78.6% fibonacci projection are. Alternative scenario: Alternatively, price may rise to the 1st resistance at 1579'0 where the overlap resistance and 38.2% fibonacci retracement are. Fundamentals: Since both countries, Russia and Ukraine, are major exporter of agriculture goods and their persistent war will lead to a shortage of agricultural goods and give us a bullish bias for soybean .
CBOT:ZS1!Short
by Genesiv
Soybeans, Corn, Naturals Gas are in Backwardation = shortA simple strategy to sell below a fractal (prior low on the chart) below 18 SMA whenever there is a backardwardation (ticker2!<ticker1!) is currently highly profitable on Soybeans, Corn, Naturals Gas, Cotton Some weeks ago the stategy was profitable on 30 year bonds. On other futures contracts the contango/backwardation might not work as relyable as on the above mentioned instruments, or you have to apply a filter for example only sell short soybeans if backwardation is below -40 (future instrument 40$ and more cheaper)
CBOT:ZS1!Short
by responsibletrad8r
Soybeans Trade Lower After a Bullish USDA ReportSoybeans Technicals (August): Yesterday’s USDA report put some pep in soybeans step right out of the gat, launching prices all they way up to technical resistance near $16.00. This is obviously a psychologically significant level, but it also represents the 50 and 100 day moving average, along with the breakdown point from June 22nd. Despite the friendly report, the market couldn’t sustain the strength which led to long liquidation at the end of month/quarter. That failure has led to weakness in the overnight and early morning session. The market has retreaded back near our pivot pocket overnight, we’ve had that labeled in previous reports as 1533 ½. The Bulls need to defend this to prevent a further decline and retest of the June 24th lows, 1494 ¾. Below that is the 200-day moving average, 1456. Bias: Neutral/Bearish Previous Session Bias: Neutral/Bearish Resistance: 1560-1566***, 1592-1597*** Pivot: 1533 ½ Support: 1494 ¾-1500****, 1456** Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
CBOT:ZSQ2022
by OliverSloup_BlueLine
Soybeans Rally Back to the Scene of the CrimeSoybeans Fundamentals: All eyes will be on tomorrow’s USDA report. The range of estimates for planted acres is 89.2-92.4 million, the USDA was at 91.0 in March. The average estimate for US soybean ending stocks as of June 1 is .954 billion bushels. Last year at this time we were at .769. Technicals (August): The market has rallied back to our resistance pocket, which we labeled in yesterday’s report as 1560-1566. This pocket represents the secondary breakdown point from last week. If the Bulls can chew through this pocket, we could see a further extension take us into the mid 1590’2, which is the original scene of the crime, aka breakdown point from June 22nd. This would also be near a psychologically significant level, 1600. If these levels can hold, they would mark lower highs. We would be looking at bearish positioning at these levels if they can hold. Bias: Neutral/Bearish Previous Session Bias: Neutral/Bearish Resistance: 1560-1566***, 1592-1597*** Pivot: 1533 ½ Support: 1494 ¾-1500****, 1451* Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
CBOT:ZSQ2022
by OliverSloup_BlueLine
Soybeans Find Their Footing Soybeans Fundamentals: Soybean futures are higher this morning after yesterday’s crop progress report showed a drop in good/excellent conditions of 3%. Keep in mind that we are still 5% better than where we were at this time last year. All eyes will be on Thursday’s USDA report. The range of estimates for planted acres is 89.2-92.4 million, the USDA was at 91.0 in March. The average estimate for US soybean ending stocks as of June 1 is .954 billion bushels. Last year at this time we were at .769. Technicals (August): Soybeans are higher this morning as the market works to retrace and recoup the losses from the big down day last week. In yesterday’s report we talked about our pivot pocket at 1533 ½, stating “If the Bulls are able to chew through this level, we could see a bigger relief rally take us back to the other breakdown points from last week, which are anywhere from 30 to 70 cents higher.”. With that in mind, we would not be surprised to see additional relief come into the market ahead of the USDA report on Thursday. Bias: Neutral/Bearish Previous Session Bias: Neutral/Bearish Resistance: 1560-1566***, 1592-1597*** Pivot: 1533 ½ Support: 1494 ¾-1500****, 1451* Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
CBOT:ZSQ2022
by OliverSloup_BlueLine
Soybeans Break Below Support Soybeans (July) Technicals: July soybean futures got hit hard last night and remain under pressure in the early morning trade. 4-star support from 1644 ¾-1650 looked as though it would hold into options expiration, with yesterday’s low coming in at 1647 ½. Those hopes evaporated quickly last night as the breakdown below support accelerated the selling, taking us down near our next support level, 1613 ¾. This level down to $16.00 is trendline support from February. The overnight low is 1610 ½. Previous support is now resistance, that comes in from 1644 ¾-1650. Bias: Neutral/Bearish Previous Session Bias: Neutral/Bearish Resistance: 1673-1679 ½***, 1700 ½-1702**, 1720-1728*** Pivot: 1644 ¾-1650 Support: 1613 ¾**, 1600**, 1578-1580 ½*** Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
CBOT:ZSN2022
by OliverSloup_BlueLine
Soybeans Under Pressure Soybeans Technicals: Soybeans broke lower yesterday, trading right into our 3-star support pocket, 1673-1679 ½. The Bulls have been unable to defend that pocket in the overnight/early morning trade which could take us to our next and more significant support pocket, 1644 ¾-1650. This pocket represents previously important price points and the 100-day moving average. Previous support will now act as our pivot pocket that the Bulls want to get back out above to neutralize the technical damage, that is the pocket mentioned earlier, 1673-1679 ½. Bias: Neutral/Bearish Previous Session Bias: Neutral/Bearish Resistance: 1700 ½-1702**, 1720-1728*** Pivot: 1673-1679 ½ Support: 1644 ¾-1650****, 1613 ¾** Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
CBOT:ZSN2022
by OliverSloup_BlueLine
2
Soybean Futures Pullback Soybeans Commitments of Traders Update: Friday’s CoT report showed Managed Money were net buyers of 4,217 futures/options through June 14th. This expands their net long to 163,146. Broken down that is 174,546 longs VS 11,400 shorts. Technicals: Soybeans are sharply lower to start the week, trading right near the 50-day oving average at the morning intermission, 1680 ¾. The market was lower than this earlier in morning, testing and holding our 3-stary support pocket, 1673-1679 ½. If the Bulls fail to defend this pocket on a closing basis, the 100-day moving average cannot be ruled out. That comes in at 1644 ¾. Bias: Neutral/Bearish Previous Session Bias: Neutral/Bearish Resistance: 1720-1728***, 1757 ½-1760**, 1775 ½-1784** Pivot: 1710 Support: 1673-1679 ½***, 1644 ¾-1650**** Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
CBOT:ZSN2022
by OliverSloup_BlueLine
Will Soybeans Stall Out Against Technical Resistance? Soybeans Fundamentals: This morning’s weekly export sales report showed net sales of 317,200 MT for 2021/2022 were down 26 percent from the previous week and 16 percent from the prior 4-week average. Net sales of 407,600 MT were reported for 2022/2023. Technicals: Soybeans are firm in the early morning trade, retracing the losses from the previous two sessions. Previous support is now resistance, the significant pocket comes in from 1720-1728. A breakout and close back above here could spark a run higher with new contract highs on the table. From the risk/reward perspective, this wouldn’t be a bad pocket for hedgers to consider selling. Bias: Neutral/Bearish Previous Session Bias: Neutral/Bearish Resistance: 1720-1728***, 1757 ½-1760**, 1775 ½-1784** Pivot: 1710 Support: 1690**, 1673-1679 ½*** Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
CBOT:ZSN2022
by OliverSloup_BlueLine
Potential Bearish ContinuationOn the H4, with price moving below the ichimoku cloud and price recently breaking the ascending trend channel, we have a bearish bias that price will drop from the pivot at 1707'6 in line with the 38.2% fibonacci retracement, 78.6% fibonacci projection and overlap resistance to the 1st support at 1661'2 in line with the 61.8% fibonacci projection and pullback support. Alternative Scenario: Alternatively, price may bounce off the pivot and rise to the 1st resistance at 1718'6 in line with the 100% fibonacci projection and pullback resistance. Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary, and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interest arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed on the website.
CBOT:ZS1!Short
by Rockqet
Soybeans Struggle to Hold Support Soybeans Technicals: July soybean futures broke and close below trendline support yesterday which opened the door for additional weakness in the overnight session. Futures have recovered some and trading near unchanged. Previous support is now resistance, we see that first hurdle coming in near 1710. On the support side of things, the 50-day moving average and low end of the range come in near 1675. If that support gives way, we could see the selling accelerate. Bias: Neutral/Bearish Previous Session Bias: Neutral/Bearish Resistance: 1720-1728***, 1757 ½-1760**, 1775 ½-1784** Pivot: 1710 Support: 1690**, 1673-1679 ½*** Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
CBOT:ZSN2022
by OliverSloup_BlueLine
Daily Soybean Market Update (6.14.22)Soybeans Fundamentals: Yesterday's weekly crop progress report showed the U.S. soybean crop is 88% planted, 70% emerged, and a Good/Excellent rating of 70%. There were no major surprises here. Yesterday's weekly export inspections report came in at 605,129 metric tons, well above the 365,455 last week and 141,320 we saw in the same week last year. Technicals: Soybean futures broke through support from 1720-1728, this will now act as resistance. A close back above here opens the door for a potential run back at the contract highs and above. There is some trendline support from May 17th-June 7th that is holding well over the past 24 hours. A break and close below here could spark a drop back below $17.00. Bias: Neutral/Bearish Previous Session Bias: Neutral/Bearish Resistance: 1757 ½-1760**, 1775 ½-1784** Pivot: 1720-1728 Support: 1690**, 1673-1679 ½*** Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
CBOT:ZSN2022
by OliverSloup_BlueLine
Event-Driven Strategy on Binary OutcomesCBOT:ZS1! Last week, I laid the groundwork for a new idea on event-driven strategy. Event-Driven Strategy Focusing on Global Crisis. Three-factor Commodities Futures Pricing Model and Game Theory Matrix were introduced, illustrated with my own experience trading COMEX Gold Futures (GC) during the US-China trade conflict in 2019. My idea was featured on Editors’ Picks, generating over 16,000 views and nearly 800 likes. Today, I would expand my idea to traders who want to construct their own event-driven strategy, in a 3-step approach. Firstly, to qualify as a crisis, it needs to have the magnitude to shock the global market. Below is a few examples of global crises in the past five years: • US-China Trade Conflict (2018): The two countries account for 42% of global GDP and have a combined population of 1.7 billion people, 22% of the world total. New tariffs imposed on thousands of goods with multi-year cumulative amount reaching $2 trillion. • African Swine Fever (2018): It reportedly wiped out 60% of the pigs in China. Supply shortage from the No. 1 pork producer sent pork price up 300% in China. Global markets from the U.S. to Europe also felt the pain, as meat prices went up across the board, affecting pork, beef, lamb, and poultry. • Brexit (2019): The withdrawal of Great Britain from the European Union resulted in a loss of 20% of GDP and 13% of population in the world’s third largest economic block. The impact on Britain itself is less than certain, as it would trade less with EU members, and more with countries outside of Europe. • COVID (2019): The Coronavirus outbreak has turned into a global pandemic, and dramatically changed the world and our lives as we know it. • Trump defeated in the U.S. presidential election (2020): It put a stop to the “America First” policies. In just four years, U.S. political landscape has once again swung widely. • Russia-Ukraine Conflict (2022): First major military conflict in Europe since WW2. In addition to the hundreds of thousands of casualty and millions of refugees, the ongoing conflict disrupted the global supply of energy and agricultural products, sending US inflation to a 40-year high. • Lockdowns in China (2022): Dozens of Chinese cities have been under some form of lockdowns in recent months, affecting a quarter of its population. It also created huge bottleneck in global supply chain, sending rippling effects around the world. Secondly, analyze the impact of a crisis and attempt to define it in binary outcomes. These outcomes must be mutually exclusive and collectively exhaustive (MECE). If you are unclear of the outcomes, or there are too many of them, it would be difficult to construct a trading strategy around the crisis. Riding on the above examples of crises events, we will have their binary outcomes as follows: • US-China Trade Conflict: Fight or Talk (alternatively, Tariff or No Tariff) • African Swine Fever: Contained or Spread Out (Not Contained) • Brexit: Approved or Not Approved • US Election: Democrats Win or Republicans Win • Ukraine situation: Putin Wins or Putin Loses (Peace deal is considered a Loss for Russia) • China’s Zero-Covid Policy: Shanghai Lockdown or End of Lockdown Thirdly, search and identify financial instruments that are most affected by the crisis. How do you know which is the right one amid a wide range of financial instruments? A quick test is to observe whether its price change correlates to the binary outcomes of the crisis. In a classical supply and demand diagram, fundamental drivers move price up or down along the supply and demand lines in a continuous fashion. A crisis event shifts the lines to the left or to the right, pushing sudden price bumps as the event hits the news headlines. Deep dive into the trade conflicts between China and the U.S., we can deploy the event-driven strategy on a commodity directly impacted by tariff. Interestingly, it was not a Chinese commodity tallied by Mr. Trump, but a U.S. commodity being taxed by China – Soybeans produced by U.S. farmers. On April 2nd, 2018, the Trump administration announced that it would impose 25% tariffs on about 1,300 industrial, technology, transportation, and medical products made in China. In less than a day, China responded by imposing a 25% tariff on 106 goods in 14 categories, including soybeans, automobiles, and chemicals originating in the U.S. Following China’s announcement, CBOT Soybeans Futures (ZS) dropped 2.2% and touched a low of $9.83/bushel. In my view, the initial price down was an understatement. I believed that CBOT Soybeans could go a lot lower with the tariff making the U.S. grains less competitive than those from South America. Over the next week, I put in Short ZS Futures positions, mainly on back-month contracts. Here are the logics behind my trades. As the world’s largest consumer and importer of Soybeans, China imports 85% of its soybeans for domestic consumption to meet the huge appetite in cooking (soybean oil) and animal feeds (soybean meal). United States is the largest producer and exporter of Soybeans, with 68% of its export going to China. Tariff takes time to impact the market fully. At first, Chinese importers expedited purchase of US soybeans ahead of the tariff deadline. They also increased buying from Brazil and Argentina. Eventually, when the cheap grains were exhausted and inventory was depleted, they would be forced to buy from American farmers again. The higher price with tariff would encourage use of alternative ingredients and reduce the overall Chinese demand on soybeans. This prediction has been proven to be on the right track, as CBOT Soybean Futures continued to decline in the next three months until it hit $8.00/bushel, down 20% from levels before the tariff. Let’s rework the Soybean trade using our 3-step approach. Firstly, Does it have the magnitude to shock the global market? Yes. 40 million metric tons of soybeans, or $15 billion a year, would be taxed by China. It had huge negative impact on U.S. farm incomes. Secondly, could we define the Soybean tariff as an event with binary outcomes? Yes, it is either “Tariff On” or “Tariff Off”. If the tension escalated, tariff would stick and become a permanent part of soybean cost. On the other hand, if US and China started a trade talk, soybean tariff could be removed later. While the tariff impact on nearby futures is fixed, it is not so on back-month futures prices. Thirdly, is Soybean Futures the right instrument to use? Let’s apply our three-factor commodities pricing model on soybean, as follows: Soybean Futures Price = Soybean Cash Price + Market Sentiment + Probability of Tariff In a “Tariff On” scenario, the probability of tariff increases to 100%. While production cost in the U.S. is not affected, Chinese exporters must pay 25% more to buy. The reduced demand for U.S. soybean has the net impact of pushing futures price down. Therefore, the sign of Tariff Premium should be negative in the case of soybean futures. In a “Tariff Off” scenario, trade talk could reduce the probability from 100% to 25%, for example. A signal of Chinese demand recovery has the net impact of raising futures price up. Typically, about 1/3 of US soybean, or 40 out of 120 million metric tons of the grain, is exported to China every year. This sheer size made tariff a dominant factor driving soybean price, outweighing fundamental factors such as planted acreage, weather, and yield. This concludes the use of US-China Trade Conflict as a case study for applying the event-driven strategy. My next writings would explore new strategies on more recent event shocks such as the lockdowns in China and the Ukraine situation. Meanwhile, please tell me what you think, either on TV or by email. Happy Trading. Disclaimers *Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
CBOT:ZS1!Long
by JimHuangChicago
7