Chicago Board of Trade front-month soybean oil futures reached their lowest level in more than two and a half years on Tuesday after China announced it would impose tariffs on imports of US soybeans.
The July soybean oil contract settled 72 points lower at 28.85 cents/lb, the lowest settle since reaching 28.75 cents/lb on November 27, 2015.
Soy products such as soybeans, soy meal and soybean oil have fallen sharply in recent weeks as trade rhetoric between the US and China has escalated. On Friday, US president Donald Trump announced the US would impose tariffs on $50 billion of Chinese goods. The Chinese government quickly followed suit, focusing some of its tariffs on agricultural commodities in areas of the US where Trump received political support in his presidential campaign in 2016.
On Tuesday, the Trump administration threatened to increase tariffs against China in response to the latter’s decision to increase tariffs.
Experts have estimated that US soybean farmers could lose billions of dollars in exports due to the Chinese tariffs. China is the world’s largest importer of soybeans. US soybean exports to China in 2017 reached $12.355 billion, according to US Department of Agriculture data.
Soybean oil is the most common feedstock for biodiesel production in the US. According the most recent data from the US Energy Information Administration, 55% of all biodiesel production in the US in 2017 used soybean oil as a feedstock.