We finally saw some strength in the markets on Friday with corn up 8 and beans up 37. 25% tariffs on $34 billion of Chinese imports took effect Friday as well as retaliatory tariffs from China (which included soybeans). China cancelled about 370k metric tons of soybeans this morning (which equates to about 10-11 million bushels), but the old adage “sell the rumor, buy the fact” held true and lent itself to commodity strength to end the week.
Now that the tariffs are in place traders are watching to see what happens next. Will we see negotiations increase or will more tariffs be slapped on. So far, it is unclear how China intends on meeting its protein feed needs without eventually buying beans from the US. Brazilian beans continue to be offered at around a 17% premium to US beans. Prices for October out of Brazil are already trading at a 20% premium to those out of the Gulf, suggesting we are quickly closing in on the level where shipments can still work even with the 25% tariff in place. Regardless, other countries have taken advantage of the price discrepancy and bought US beans on the way down leading to weekly export sales that came in larger than expected.
Weather looks to be warm and dry this week with cooler and wetter conditions forecasted for next week across the corn belt.
The markets have opened 6 lower in corn and 16 lower in soybeans indicating that Friday’s short covering may have been overdone.
This could be a very volatile week with crop progress out this afternoon and the USDA’s Supply and Demand report released on Thursday.
Have a Safe Day!