Market News

New tariff concerns pressure grains and oilseeds

Soybeans were lower on profit taking and technical selling, but still managed a strong weekly gain. Commodities in general reacted to talk of new tariffs on imports from Mexico by President Trump. Mexico is a buyer of U.S. soybeans and soybean meal. The USDA’s weekly export sales data shows China bought U.S. beans recently, mostly switched from unknown destinations, and more planting delays are probable in some areas, but others could make near-term progress. Still, Beijing says it’s not buying U.S. beans again until there’s progress in trade talks. The next round of negotiations isn’t expected until the G20 in Japan in late June. The final quarter for the 2018/19 marketing year for corn, sorghum, and soybeans starts June 1^st. Soybean meal and oil followed beans lower. The Buenos Aires Grain Exchange says 91% of Argentina’s soybean crop is harvested, with DTN reporting 60% of the crop remains unsold as an inflation hedge.

Corn was lower on profit taking and technical selling, still posting a solid week to week gain. Corn also reacted to those new tariff threats because Mexico is a leading importer of U.S. corn and Mexico has reportedly threatened retaliatory tariffs on some key U.S. ag goods. The trade is also watching the weather, with more delays expected in parts of the Midwest against near-term progress in others. Some acres are probably lost to the wet weather and tens of millions of acres remain unplanted in key U.S. states. The USDA’s weekly crop numbers are out Monday afternoon and updated supply, demand, and production estimates are due June 11^th. According to AgriCensus, Smithfield is buying corn from South American because of concerns about new crop U.S. production. Brazil’s Agroconsult pegs 2018/19 production for that nation at 100.4 million tons, with a record large second crop. The Buenos Aires Grain Exchange says just over 37% of Argentina’s corn crop is harvested. Brazil and Ukraine are also more competitive on the export market after the recent surge in U.S. prices. Ethanol futures were weak to lower, even with the official announcement of year-round E15 availability. The USDA’s attaché for China says Fall Armyworm has not spread to 15 provinces in China and is expected to reach key production areas of the northeast in June. China is the second biggest producer of corn but doesn’t trade most of domestic production.

The wheat complex was lower on profit taking and technical selling, with the three U.S. exchanges finishing the week firm to higher. Spring wheat planting could pick up steam in parts of the northern Plains with generally near-term weather in many forecasts, while irreversible damage has been done to some of the winter wheat crop. The new proposed tariffs on Mexico are also bearish for wheat. Mexico is a big buyer of U.S. wheat and a new round of tariffs is expected to complicate enaction of the USMCA trade pact. It remains to be seen if wheat will be included in Mexico’s retaliation. The 2018/19 marketing year for wheat officially ended Friday, with export sales for the tail end of the marketing year reported by mid-June. A few minor wheat tenders remain open. The Buenos Aires Grain Exchange says about 8% of Argentina’s wheat crop is planted. The trade is also watching weather issues in Canada, the Black Sea region, and Australia.