The ongoing drought was a large drive force for the soaring price of Soybeans. Especifically, the US growing prices would notably influence global central-planners’ actions and more specifically the Chinese.
As the LA Times reported, food prices remain elevated and the PBoC is undertaking Reverse Repos – the exact opposite of an RRR-driven easing program so many expected. However, there is a further, deeper, and more troubling consequence than ‘simple’ inflationary arguments – that of social unrest.
Moreover, it is important to note that Soybean oil is the most important edible oil in China with more than two-thirds of cooking oil consumed in China coming from soybeans. Most of those soybeans are supplied by the US (more than half of US exports are to China and the US is China’s number 1 supplier).
This is important because according to the USDA, the Chinese households devote more than 20% of their income to food. In fact, this is three times more than Americans.
