Soybean Prices at Immediate Risk
US Considering Pre-emptive Sanctions on China
CHS is the largest agriculture coop in the world. They load a lot of ships with grain in the PNW for China delivery. Three hours ago, CHS’ Kevin Stockard: The U.S. is reportedly considering sanctions against China to discourage them from invading Taiwan.
Two hours ago, CNBC reported:
The United States is considering options for a sanctions package against China to deter it from invading Taiwan, with the European Union coming under diplomatic pressure from Taipei to do the same, according to sources familiar with the discussions.
The sources said the deliberations in Washington and Taipei’s separate lobbying of EU envoys were both at an early stage -- a response to fears of a Chinese invasion which have grown as military tensions escalate in the Taiwan Strait.
In both cases, the idea is to take sanctions beyond measures already taken in the West to restrict some trade and investment with China in sensitive technologies like computer chips and telecoms equipment.
The sources did not provide any details of what is being considered but the notion of sanctions on the world’s second-largest economy and one of the global supply chain’s biggest links raises questions of feasibility.
“The potential imposition of sanctions on China is a far more complex exercise than sanctions on Russia, given U.S. and allies’ extensive entanglement with the Chinese economy,” said Nazak Nikakhtar, a former senior U.S. Commerce Department official.
China claims Taiwan as its own territory and last month fired missiles over the island and sailed warships across their unofficial sea frontier after U.S. House of Representatives Speaker Nancy Pelosi visited Taipei in what Beijing saw as a provocation.
Chinese President Xi Jinping has vowed to reunify democratically-governed Taiwan with the mainland and has not ruled out the use of force. He is set to secure a third, five-year leadership term at a Communist Party congress next month.
In Washington, officials are considering options for a possible package of sanctions against China to deter Xi from attempting to invade Taiwan, said a U.S. official and an official from a country in close coordination with Washington.
U.S. talks over sanctions began after Russia invaded Ukraine in February, but took on fresh urgency after the Chinese reaction to Pelosi’s visit, the two sources said.
The United States, backed by NATO allies, took a similar approach to Russia in January with a threat of unspecified sanctions but this failed to dissuade Russian President Vladimir Putin from launching his invasion of Ukraine.
The White House is focused on getting countries on the same page, including coordinating between Europe and Asia, and avoiding provoking Beijing, the non-U.S. official said.
The White House declined to comment.
Taiwan’s Foreign Ministry said it had discussed China’s recent war games and the “great challenges” China poses to Taiwan and the region with the United States, Europe and other like-minded partners, but could not disclose details.
China’s Foreign Ministry did not respond to a request for comment.
Taiwan had already broached sanctions with European officials after Russia’s invasion of Ukraine, but China’s recent military exercises have seen Taiwan’s position harden, six sources briefed on the Taiwan-Europe discussions told Reuters.
Top Taiwanese officials’ calls for sanctions preparations have intensified in recent weeks. A recent Chinese white paper, which withdrew a promise not to send troops or administrators to Taiwan if Beijing takes control of the island, has prompted a redoubling of their efforts with Europe.
Taiwan has not asked for anything specific, only for Europe to plan what actions it may take if China attacked, one source briefed on discussions said, and has asked Europe to warn China privately that it would face consequences.
EU officials have so far shied away from imposing tough sanctions on China over human rights issues, as the country plays a far bigger role for the bloc’s economy than Russia, said another person familiar with the matter.
Talk like that will crush the soybean market at least briefly. Longer term, China will still need our beans and bean prices will recover, but this might be a good time to consider some put options. Assess your financial risk and make a decision, even if it is to not do anything.
November $14 put is 16 cents; $14.50 put is 32 cents and the $15 put is 58 cents.
Soybean futures daily trading limit is $1.15 per day.
Another possibility is to price beans now and then buy puts if beans go higher to make money on the way down not made on the way up.
We do NOT think sanctions will be applied, but the talk can wreck bean prices for a month or more.