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With the threat of tariffs and counter-tariffs between Washington and Beijing looming, Chinese buyers are canceling orders for U.S. soybeans, trend that could deal a blow to American farmers if it continues.

Soybean futures are currently 4 to 5 cents higher after being 1 to 4 cents in the red. Preliminary open interest rose 9,265 contracts, with net new selling concentrated in August and November. Soy meal was up 50 cents/ton, with front month soy oil 38 points higher. The trade ideas for old crop soybean sales in this morning’s USDA report are running 300,000 to 600,000 MT in the week that ended 5/3. New crop is seen at 100,000-300,000 MT. Soy meal sales are projected at 100,000-400,000 MT with bean oil sales at 15,000-60,000 MT. For the WASDE report, world soybean ending stocks for 17/18 are estimated 0.9 MMT lower at 89.9 MMT. Analysts are expecting the USDA’s initial 2018/19 world carryout projection at 91.2 MMT, a slight increase from 17/18. Brazilian analyst Celeres is putting the soybean crop there at 117.8 MMT.

Repeated rains that fall on Argentina’s main agricultural region weeks ago are hampering the 2017/18 soy harvest, which could have an impact on grain production that has already suffered hard cuts by a drought that extended throughout the austral summer. Excessive moisture could reduce soybean yields by 5 to 15 percent, and cause a 30 percent drop in its price because, because of the weather, the pods are opening early or the Grains are germinating within them. Some sources speak of a soybean production of 37, 38 million tons, and that the effect of the rains could be between 1, 1.5 million less.

For many reasons, Brazilian exports of soybeans to China are surging. First, following a record soybean crop of 4.19 billion bushels in 2016/17, Brazilian soybean ending stocks reached a record-high of approximately 940 million bushels. Then, Brazilian soybean farmers are expected to top that record with a crop of 4.23 billion bushels for the 2017/18 marketing year. Given two back-to-back record harvests, and record-large inventory levels, the increase in Brazilian soybean exports was no surprise. For the 2017/18 marketing year, Brazilian soybean exports are projected at a record-high 2.7 billion bushels, marking the eighth consecutive year of record soybean exports. Meanwhile, following back-to-back record soybean crops in the U.S., soybean exports are projected to fall 5 percent in 2017/18 to 2.1 billion bushels. Due to reduced export volumes, U.S. soybean ending stocks are projected at 550 million bushels.

China’s April soybean imports fell 13.7 percent from the same month a year earlier to 6.9 million tonnes. The decline came in the same month that Beijing threatened to slap an additional 25 percent import duty on soybeans from the United States in an ongoing trade war between the world’s top two economies. China imports 60 percent of the oilseed traded worldwide to make meal for its massive livestock herd, with about a third of its imports typically from the United States.

Madhya Pradesh is targeting soybean production of 5.5 mln tn in 2018-19 (Jul-Jun), up from 5.3 mln tn produced in the previous year. The state, the top grower of soybean in the country, harvested a smaller crop in 2017-18 because of patchy monsoon in some parts of central India. A rise in acreage may also result in higher crop output this year. Farmers, who had moved to coarse grains in 2017-18 following low rains, are expected to return to soybean this year.