Soybean futures dropped Tuesday to their lowest in more than two years following renewed concerns about a U.S.-China trade war.

A war of words between the two countries picked up overnight, following announcements of tit-for-tat tariffs on $34 billion worth of imports late last week. In retaliation against planned U.S. duties, Beijing intends to impose a 25 percent tariff on 545 U.S. goods, including soybeans.

Soybean futures for July delivery fell more than 2.5 percent, to a low of $8.82 a bushel, their lowest since March 2016, according to FactSet. They were trading near $8.84 a bushel as of 9:45 a.m. ET.

Prices are now 15 percent lower for the quarter and down more than 7.5 percent for the year.

Wheat, corn and oat futures also fell to a lesser degree Tuesday, while rough rice futures were up slightly.

“The dramatic drop today is soybeans because soybeans is first and foremost what the Chinese like to buy from us,” said Phil Flynn, senior market analyst at The Price Futures Group.

More than half of U.S. soybeans go to China, the world’s largest consumer of the beans.

If Beijing imposed a 10 percent tariff on U.S. soybeans, total American soybean exports could drop by 18 percent, according to a study for the U.S. Soybean Export Council by Purdue University agricultural economists Wally Tyner and Farzad Taheripour.

If China implemented a 30 percent tariff, total U.S. soybean exports could fall 40 percent, according to the study, released in late March. Prices would fall 2 or 5 percent over a few years, respectively, under the two different scenarios, the analysis said.

In addition to negative sentiment around the trade dispute, Flynn attributed the drop in soybean prices to dollar strength, which makes U.S. goods relatively more expensive overseas. The U.S. dollar index rose nearly 0.4 percent Tuesday and is up 5.5 percent this quarter.

“I think ultimately the world is going to buy our beans,” Flynn said. “The demand is there. People have to eat. The decrease in price may offset the fact there might be a tariff.”

Source: Investment Cnbc
Soybean prices drop to two-year low on US-China trade war fears