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Trade War Fears Sink Dow Over 600 Points, Soybeans Turn Higher
DES MOINES, Iowa -- On Friday, the CME Group’s farm markets ended mostly higher, reversing direction, despite the news of additional tariffs on Chinese imports.
At the close, the May corn futures settled 1¢ lower at $3.88. July futures finished 1¼¢ lower at $3.97.
May soybean futures finished 2½¢ higher at $10.33¾. July soybean futures ended 2¾¢ higher at $10.44.
May wheat futures ended 7½¢ higher at $4.72¼.
May soy meal futures closed $3.10 per short ton higher at $390.10. January soy oil futures finished 0.25¢ lower at 31.53¢ per pound.
In the outside markets, the NYMEX crude oil market is $1.67 lower, the U.S. dollar is lower, and the Dow Jones Industrials are 640 points lower.
Mike North, president of Commodity Risk Management Group, says that one can hear lingering in the background an old expression from our childhood.....“Oh, yeah? Watch this!”
“This week, U.S. and Chinese officials have taken turns using that line as tariffs were proposed or threatened by each country. The whipsaw effect of these announcements has given traders heartburn as prices dropped precipitously only to recover in the wake of future hope that nothing would materialize or that impacts would be small,” North says.
North adds, “Nonetheless, it has distracted the ongoing conversation about weather that threatens to further slow spring planting and tighten balance sheets as lower acreage couples with the possibility of lower yields. Heap on top of that the incredibly long fund position, and we have the makings of some extreme volatility. And that is the best way to define the week.”
Al Kluis, Kluis Commodities, says the market is reacting negatively to the U.S. announcing Thursday night an additional $100 billion in tariffs against China.
“Well, the potential trade war between the U.S. and China seems to be heating up again. That news spooked the U.S. grain prices and stock markets. Traders fear that an all-out war is on the horizon,” Kluis told customers in a daily note Friday.
Kluis adds, “If, in fact, China does impose import tariffs on U.S. grains, then that will be the start of a deep landslide for corn, soybean, and wheat prices.”
On Friday, the USDA announced numerous fresh corn and soybean export activity:
- Export sales of 100,000 metric tons of corn for delivery to Egypt during the 2017/2018 marketing year.
- Export sales of 130,632 metric tons of soybeans for delivery to Mexico. Of the total, 65,316 metric tons is for delivery during the 2017/2018 marketing year and 65,316 metric tons is for delivery during the 2018/2019 marketing year.
- Export sales of 20,000 metric tons of soybean oil for delivery to unknown destinations during the 2017/2018 marketing year.
- Export sales of 458,000 metric tons of soybeans for delivery to unknown destinations. Of the total, 327,000 metric tons is for delivery during the 2017/2018 marketing year and 131,000 metric tons is for delivery during the 2018/2019 marketing year.
The marketing year for corn and soybeans began September 1; for soybean oil, it began October 1.
Thursday’s Grain Market Review
On Thursday, the CME Group’s farm markets ignored the recent bearish trade news and closed stronger.
At the close, the May corn futures finished 8½¢ higher at $3.89½; July futures finished 8½¢ higher at $3.98¼.
May soybean futures ended 16¢ higher at $10.31¼; July soybean futures closed 15¢ higher at $10.42.
May wheat futures settled 9¢ higher at $4.64¾.
May soy meal futures closed $1.80 per short ton higher at $383.60. January soy oil futures finished 0.10¢ higher at 31.78¢ per pound.
In the outside markets, the NYMEX crude oil market is 22¢ higher, the U.S. dollar is higher, and the Dow Jones Industrials are 269 points higher.
Jason Roose, U.S. Commodities, says the markets are relying too heavily on the weather to go downward.
“Grains are adding premium today after Wednesday’s negative export tariff news. The lower-planted acres and cool wet forecast are the driving force, adding back in weather premium,” Roose says.
On Thursday, the USDA Weekly Export Sales Report showed that soybean sales beat expectations, while corn came within and wheat sales missed.
- Wheat: 309,200 metric tons (mt) vs. the trade’s expectations of between 350,000 and 650,000 mt
- Corn: 909,300 mt vs. the trade’s expectations of between 1,100,000 and 1,600,000 mt
- Soybeans: 1.491 mmt vs. the trade’s expectations of between 600,000 and 1,100,000 mt
Wednesday’s Grain Market Review
Soybeans finished down by double digits but were well off session lows Wednesday after China announced tariffs on $50 billion in U.S. goods including agricultural products.
Along with soybeans, U.S. corn, durum wheat, and beef were all included on the list of items on which China said it would impose levies. Soybean prices declined sharply overnight, falling more than 50¢, before giving back some of their losses.
Chinese officials have said they’re taking a wait-and-see approach before implementing the tariffs. Any moves likely would be dependent on whether the U.S. first implements its own levies against $50 billion worth of Chinese goods.
Goldman Sachs said in a note to clients this morning that the inclusion of soybeans shows how far China is willing to go in the trade dispute with the Trump administration. Still, the investment bank said, demand for pork, of which soybeans are a very large input, won’t subside so the balance sheet won’t change much. The Asian country likely will source some of its soybeans from South America, but it likely will seek future supplies from the U.S. in the long-term, Goldman analysts said.
The American Soybean Association said in a statement that it’s frustrated about how far the trade row with China has gone and that growers were caught in the middle, noting China accounts for 61% of all soybean exports. It called on the White House to reconsider the tariffs that led to the retaliation.
The ASA on March 12 sent a letter to the White House asking to meet with President Trump, but so far it hasn’t received a response.
“We have been warning the administration and members of Congress that this would happen since the prospect for tariffs was raised,” the ASA said in a statemen today. “That, unfortunately, doesn’t lend any comfort to the hundreds of thousands of soybean farmers who will be affected by these tariffs. This is no longer a hypothetical, and a 25% tariff on U.S. soybeans into China will have a devastating effect on every soybean farmer in America.”
Soybean futures for May delivery fell 21¼¢ to $10.16¾ a bushel on the Chicago Board of Trade. Soy meal rebounded, gaining $1.50 to $381.50 a short ton, while soy oil declined 0.59¢ to 31.75¢ a pound.
Corn futures declined 8¢ to $3.80½ a bushel.
Wheat dropped 2¢ to $4.55½ a bushel, while Kansas City futures gained 1¢ to $4.85¾ a bushel.
Tuesday’s Market Recap
DES MOINES, Iowa -- On Tuesday, the CME Group’s farm markets ended higher, but well off the daily highs.
At the close, the May corn futures finished 1¼¢ higher at $3.88½, after trading as high as 11¢ higher. July futures closed 1½¢ higher at $3.97.
May soybean futures finished 2½¢ higher at $10.38; July soybean futures closed 3¢ higher at $10.49¼.
May wheat futures ended 11¼¢ higher at $4.57½.
May soy meal futures finished $2.70 per short ton higher at $380. January soy oil futures closed 0.30¢ higher at 32.34¢ per pound.
In the outside markets, the NYMEX crude oil market is 48¢ higher, the U.S. dollar is higher, and the Dow Jones Industrials are 241 points higher.