Wheat managed to fend of a lot of the downward momentum radiating from the soybean and corn contracts.
China was the key to the sudden drop in row crop values.
China revealed a list of 106 US items that will be hit with import tariffs. Part of that list was made up of agricultural products including soybeans, corn, cotton, sorghum, DDG, durum, wheat, beef and fruit items. Interesting to note that whiskey was also on the list.
The announcement smashed soybeans and corn both of which staged somewhat of a recovery throughout the later stages of the session but could not claw back the losses set at the start.
Soybeans closed down 22.75c/bu (AUD$10.80) by the close, the daily limit move for soybeans at Chicago is 65c. Soybean futures are still trading above US$10/bu, so it’s not like it is the end of the world.
The tariff on US soybeans is 25%. As mentioned last week US soybeans are already cheaper than S.American beans. The tariff is probably more likely to hurt Chinese importers more than US farmers if S.American crops are as poor as what most analyst are predicting. Potentially we wil see the spread to US beans increase further now.
What impact the tariff on US soybeans will have for competing products like canola oil is yet to be seen but first thoughts do tend to point to a possible increase in oils other than soy or potentially much larger imports into China of S.American soybeans.
In the real world it will probably be a little of column A and a little of column B. So for Aussie canola growers, it probably ain’t a bad thing.