The opinions expressed in this report are those of Inspirante Trading Solutions Pte Ltd (“ITS”) and are considered market commentary. They are not intended to act as investment recommendations. Full disclaimers are available at the end of this report.
Upcoming economic events (Singapore Local Time):
Date
Time
Venue
2025-03-12
20:30
U.S. CPI (Feb)
2025-03-13
20:30
U.S. PPI (Feb)
2025-03-17
10:00
China Industrial Production YoY (Jan-Feb)
2025-03-19
07:50
Japan Balance of Trade (Feb)
2025-03-19
11:00
BOJ Interest Rate Decision
2025-03-20
02:00
Fed Interest Rate Decision and FOMC Economic Projections
2025-03-21
07:30
Japan CPI (Feb)
Market snapshots
Figure 1: Corn futures (May 2025 Contract)
After briefly breaking above a key resistance level, corn prices appeared to signal the start of a recovery. However, the move quickly lost momentum, leading to a sharp reversal that pushed prices back below the same critical level. This failed breakout increases the likelihood of further downside, as the breached support now acts as resistance.
Soybean meal prices remain in a clear descending channel, with lower highs and lower lows reinforcing the bearish structure. The recent rebound suggests a short-term counter-trend rally, but the broader trend remains downward.
Figure 3: Soybean futures (May 2025 Contract)
Soybean prices have slipped back into a key pivot zone, hinting at renewed selling pressure after failing to maintain higher levels. The market’s inability to rebound decisively from this consolidation area underscores weakening bullish momentum. A sustained break below would reinforce the primary downtrend and open the door to further downside targets, confirming a broadly bearish outlook.
Figure 4: Brazilian Real futures
Over the past two decades, the Brazilian real has depreciated significantly and has since remained near its current support level. A renewed increase in currency demand could provide the momentum needed to push it back into its previous trading range.
Beyond the charts
On March 4, US President Donald Trump eliminated any lingering doubts that the tariff threats were merely negotiation tactics for Canada, Mexico and China. The previous deferral of tariffs had fueled hopes that new trade agreements with U.S. partners would prevent their implementation, leading many to bet against the tariffs taking effect. However, as the deadline approached without new trade-liberalizing developments, markets adjusted their expectations, triggering a broad sell-off across various asset classes. Market sentiment throughout the week has fluctuated in response to evolving tariff developments.
It was no surprise that retaliation was swift. Canada immediately imposed 25% tariffs on over 20 billion dollars’ worth of American imports, targeting steel, aluminium and various consumer goods. Despite the U.S. postponing car tariffs, Canadian Prime Minister Justin Trudeau remains firm, refusing to lift Canada’s retaliatory tariffs until the U.S. removes its own. Canada’s unwavering stance underscores its determination to stand its ground in this trade dispute. Meanwhile, China responded with tariffs on U.S. agricultural imports. As the largest buyer of several U.S. agricultural products, China’s levies discourage businesses from sourcing from the U.S., leading to an anticipated sharp drop in demand for American agricultural goods. With both sides holding firm and no clear path toward resolution, it is increasingly likely that this trade tension, and the back-and-forth negotiations surrounding it, will drag on for much longer before we see any meaningful breakthroughs. This largely explains the widespread sell-off in agricultural commodities.
A deeper look into the interconnected agricultural markets suggests that this sell-off may only mark the beginning of a broader bearish trend. With retaliatory tariffs on meat products from Canada and China, international demand for U.S. livestock is expected to decline. This could leave producers struggling to offload stock, discouraging further production. In the U.S., more than half of the corn supply is used for animal feed, while 80% of soybean is crushed into soybean meal, almost entirely for livestock consumption. A reduction in livestock production would weaken demand for animal feed, further depressing soybean meal and thus soybean prices. This pressure is amplified by the direct tariffs on soybeans, exacerbating the downside risks.
Beyond immediate price pressures, the trade conflicts are likely to trigger global trade realignments as importing countries seek alternative suppliers to replace U.S. exports. Brazil, a leading global exporter of many agricultural products, potentially stands to become a major beneficiary of this shift. With China’s high demand, new trade agreements between the two nations could easily boost Brazil’s export volumes and trade surplus. A higher trade surplus generally leads to greater foreign capital inflows, supporting the appreciation of the Brazilian real. Moreover, if the shift in the global trade landscape proves to be structural rather than temporary, it could reinforce long-term strength in Brazil’s currency and its broader economic position.
From ideas to actions
We conclude with the following hypothetical trades:1:
Case Study 1: Short Micro Soybean futures
We would consider taking a short position in the Micro Soybean futures (MZSK5) at the current price of 1020, with a stop-loss above 1035, a hypothetical maximum loss of 1035 – 1020 = 15 points. Looking at Figure 3, if soybean prices decisively break below the resistance level, it could signal a strong downside momentum reaching its previous low at 960, resulting in 1020 – 960 = 60 points. Each Micro Soybean futures contract represents 500 bushels, and each point move is 5 USD. Given the increased flexibility and greater precision offered by the Micro contracts, it is not surprising that the newly launched Micro Grain and Oilseeds contracts have demonstrated exceptional liquidity and interest in the first week following their launch; with Micro Soybean futures contract alone bolstering more than 70,000 daily volume last week. Standard Soybean futures contracts are also available with each point move equivalent to 50 USD.
Case Study 2: Long Brazilian Real futures
We would consider taking a long position in Brazilian Real futures (6LJ5) at the current price of 0.1700, with a stop-loss below 0.1590, a hypothetical maximum loss of 0.1700 – 0.1590 = 0.0110 points. Looking at Figure 4, the Brazilian real has the potential to rise back to its key levels at 0.2450 and 0.3200, resulting in 0.2450 – 0.1700 = 0.075 points and 0.3200 – 0.1700 = 0.15 points, respectively. Each point move in the Brazilian Real futures contract is 100,000 USD.
1 Examples cited above are for illustration only and shall not be construed as investment recommendations or advice. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios. Please refer to full disclaimers at the end of the commentary.
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