** 6:30 AM CST CBOT Prices: May soybeans are down 47 cents at $9.91, May corn is down 12.5 cents at $3.7575, and May Chi wheat is down 6.50 cents at $4.51.
** AgResource AM Grain & Oilseed Comment: Good Morning! It has been an emotional and sharply lower CBOT overnight trade as China quickly retaliated against the US by announcing $50 Bil of trade tariffs on US goods in a response to President’s Trump’s proposed tariffs on Chinese goods announced late Tuesday. The rapid 25% Chinese tariff response was a surprise. The US ag goods targeted are; soybeans, sorghum, cotton, corn products, hi protein US wheat, orange juice, and some US beef cuts.
The tit-for-tat trade measures announced by both the US and China raises the prospect for a full-blown trade war. The news has caused sharp losses for already jittery financial markets and emotions are running high. The US DOW is expected to open 500 plus points lower which Chinese Yuan posted sharp losses.
The only good news is that neither the US nor China has announced when the new trade tariffs become active, this opens the door for negotiation.
It appears that China has targeted the Trump voter base by placing hefty import tariffs on US ag goods and aircraft/construction.
USDA Sec Sonny Purdue said late Tuesday in Michigan, that the Trump Administration is working on ideas for compensating US farmers who have been harmed by China’s retaliatory tariffs on US commodities. Sec Purdue did not offer any specifics on how the compensation might be applied, but he said that the USDA wanted to send a message that US agriculture cannot be held hostage by China’s targeted trade policies. The overnight Chinese decision will add pressure on the USDA to craft a rapid response to support farm income.
ARC research notes that China is already taxing imported soybeans at 13% and it’s unclear whether the announced 25% tax is a step up of 12% or a combined new tax of 38%? ARC notes that China cannot avoid importing at least 25 MMTs of US soybeans since South American supplies are inadequate to meet their projected annual import demand of 97-100 MMTs in 2017/18.
The impact on US corn, sorghum, wheat & beef markets will be modest as China is not a sizeable importer. However, in the world of algo-reading computers that trade headlines, the market will “shoot first and ask questions later”.
Our point to clients is that the ag markets will overreact this AM with funds holding a sizable net long CBOT position. Longer term, (should the tariffs become enacted and lasting), world consumption of ag products is unlikely to change, it’s just that non-Chinese buyers will be pushed to the US. End users should see the CBOT break as a buying opportunity in cash and the call option marketplace. Key support is not that far underneath at; $9.65-9.80 May soybeans, $3.60-3.70 May corn, and $4.40 and under May wheat. The grains should gain on soybeans amid the news, with key support in May soybean pegged at $350-355.00. ARC would caution against turning bearish on the China tariff news as our hope is that trade negotiation is soon to follow.
** Soaking Rain To Help Ease Argentine Drought Next 10 Days:
