This week, commodity markets held its breath as the White House unveiled its reciprocal tariffs. The list of countries impacted by the tariffs was expansive and the size of tariffs was within expectations. Very few escaped, and reactions have been mixed, from outrage to bemusement, to relief they weren’t tougher.
Notably, the countries which have perhaps borne the majority of pressure since the administration came to power, escaped relatively unscathed. Canada and Mexico are still bound by the USMCA Free Trade agreement with all commodities previously listed unaffected by these new tariffs. Importantly these include beef (Mexico is a big exporter to the US) and canola (Canada is a big exporter of processed oil). As a result, ICE (Winnipeg) canola has recovered everything it initially lost after the Chinese imposed duties on meal and oil.
Coupled with encouraging signals from the White House about the US biofuel program, ICE canola prices have staged a Lazarus-like recovery.
Back to the reciprocal tariffs and some of the US’s major trading partners, China and the European Union, have been left reeling. China has had an additional 34% on top of the 20% previously announced. EU27 has a 20% tariff placed on its exports. Some of the countries with the biggest tariffs applied are in the SE Asia area which is perhaps a nod to the advancing manufacturing and animal protein industries in the area.
Markets were a sea of red today. Crude oil fell 6% due to speculation of a negative economic reaction to recent trade news, with rapeseed prices following suit. The S&P 500 also dropped another couple of trillion, down 5.5%.
Australia didn’t dodge the bullet either, copping a relatively ‘mild’ 10% tariff on our exports. Our beef and wine industries will feel some heat. Short term, the US will still need to import our beef as the US domestic herd has been shrinking. The price of ground beef will rise, likely hitting the US consumer in the hip pocket, but no doubt the ‘Golden Arches’ will find a way of covering that up. Steel and Aluminium are still at the end of the 25% tariff previously imposed.
Now that the market knows what it is dealing with, it will be interesting to watch how it responds. No doubt the negotiations are only just beginning with the US looking for concessions and improved trading terms. Trading partners may also see some realignment as importers look to get better deals from alternative origins. For example, Japan imports 200kmt of beef from the US and may look to Australia to fill the gap should no compromise be reached. Similarly, the EU27 imported 5.6mmt of US soybeans last year for the meal and biofuel industry. Again, this may benefit the Australian canola market if the Europeans look elsewhere for supply.
Next Week
Many moving pieces here at the moment. Much like anything, it is the uncertainty that causes grief. Now we play the hand we’re dealt.
The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) released its December Crop Report last week, and it came with some serious bumping
Another ‘geopolitic’ type of week, with little fundamental news but lots of political intrigue to keep the market ticking over. News that the US President
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Our team of market analysts are recognised as leaders in Australian Ag market analysis, providing invaluable insights to help you navigate the ever-changing commodity landscape.
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Day after Liberation Day
Notably, the countries which have perhaps borne the majority of pressure since the administration came to power, escaped relatively unscathed. Canada and Mexico are still bound by the USMCA Free Trade agreement with all commodities previously listed unaffected by these new tariffs. Importantly these include beef (Mexico is a big exporter to the US) and canola (Canada is a big exporter of processed oil). As a result, ICE (Winnipeg) canola has recovered everything it initially lost after the Chinese imposed duties on meal and oil.
Coupled with encouraging signals from the White House about the US biofuel program, ICE canola prices have staged a Lazarus-like recovery.
Back to the reciprocal tariffs and some of the US’s major trading partners, China and the European Union, have been left reeling. China has had an additional 34% on top of the 20% previously announced. EU27 has a 20% tariff placed on its exports. Some of the countries with the biggest tariffs applied are in the SE Asia area which is perhaps a nod to the advancing manufacturing and animal protein industries in the area.
Markets were a sea of red today. Crude oil fell 6% due to speculation of a negative economic reaction to recent trade news, with rapeseed prices following suit. The S&P 500 also dropped another couple of trillion, down 5.5%.
Australia didn’t dodge the bullet either, copping a relatively ‘mild’ 10% tariff on our exports. Our beef and wine industries will feel some heat. Short term, the US will still need to import our beef as the US domestic herd has been shrinking. The price of ground beef will rise, likely hitting the US consumer in the hip pocket, but no doubt the ‘Golden Arches’ will find a way of covering that up. Steel and Aluminium are still at the end of the 25% tariff previously imposed.
Now that the market knows what it is dealing with, it will be interesting to watch how it responds. No doubt the negotiations are only just beginning with the US looking for concessions and improved trading terms. Trading partners may also see some realignment as importers look to get better deals from alternative origins. For example, Japan imports 200kmt of beef from the US and may look to Australia to fill the gap should no compromise be reached. Similarly, the EU27 imported 5.6mmt of US soybeans last year for the meal and biofuel industry. Again, this may benefit the Australian canola market if the Europeans look elsewhere for supply.
Next Week
Many moving pieces here at the moment. Much like anything, it is the uncertainty that causes grief. Now we play the hand we’re dealt.
Have any questions or comments?
Click on graph to expand
Data sources: CommBank, Reuters, Next Level Grain Marketing, Mecardo
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A good WA spring driving crop production
The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) released its December Crop Report last week, and it came with some serious bumping
Price pressure as production picks up
A week or so ago, I wrote how ‘big crops get bigger’. True to form, the trend continues. This week, StatsCan updated their production data
A slow harvest and drifting prices
Summer is here, yet it has been hard to find spring heat in the south, let alone summer. Cool, wet conditions continue to delay harvest
Thanksgiving caps a flat week
Another ‘geopolitic’ type of week, with little fundamental news but lots of political intrigue to keep the market ticking over. News that the US President
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Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published
Listen to the podcast
Join the Mecardo team for the Commodity Conversations podcast, where we provide short weekly market recaps and longer conversations with guests to discuss the drivers and trends in livestock, grain and fibre markets.
MEET THE TEAM
Our team of market analysts are recognised as leaders in Australian Ag market analysis, providing invaluable insights to help you navigate the ever-changing commodity landscape.
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We don’t just bring you the most up to date market insights. Find out more about Mecardo’s services including risk management advisory, modelling, benchmarking, research & consultancy.