It never ceases to amaze how quickly politics can turn market sentiment. This week, the slumbering trade dispute between the US and China flared back to life after Beijing announced new export restrictions on rare earths and retaliatory port fees on US-flagged vessels. What had been months of tentative improvement in relations quickly unravelled in a fresh round of tit-for-tat measures. In response, President Trump imposed a sweeping 100% import tariff on Chinese-made goods, on top of existing tariffs, and initially dismissed any prospect of talks at this month’s APEC meeting.
Any faint hope among US farmers that a Trump–Xi meeting might revive Chinese purchases of US soybeans now looks increasingly remote. China is reportedly covered for soybean imports through to December, leaving only a narrow window for US exporters before South American new-crop supplies return to market.
Financial markets reeled on the tariff news, with equities, commodities, and cryptocurrencies all sharply lower before staging a partial recovery as rhetoric softened. Agricultural commodities, however, remain under pressure.
It is becoming increasingly evident that the US will need to diversify markets if it has any hope of staving off a longer-term slide in agricultural commodity prices (mainly soybeans). Increasing domestic crushing could be a longer-term solution, assuming biofuel mandates are retained or increased. This does then raise questions over Canada’s canola crush and export volume into the US. Corn and wheat exports out of the US continue to overperform, which is a glimmer of hope for US farmers.
Elsewhere in the oilseed complex, Indonesia is reportedly considering lifting its biodiesel blend rate from B40 to B50, a move aimed at achieving diesel self-sufficiency. Such a shift could tighten export availability of palm oil, the world’s most traded vegetable oil. Palm oil prices have already surged around 23% since May, driven by strong domestic consumption and robust demand from India and China.
Unfortunately for canola, prices have not shared in the rally. Ample supply from Europe and Canada and uncertain global demand have kept the market largely anchored despite strength in related oils.
The week ahead….
Looking forward, the market will price in sentiment from high-level talks with China. Importer interest appears to be awakening, with several alternative origins (other than Russia) being awarded tenders.
The wheat complex has experienced a rather choppy few days, with systematic profit-taking shifting some of the heat out of the supply-squeeze-driven buoyancy we are
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Politics back in the driver’s seat
Any faint hope among US farmers that a Trump–Xi meeting might revive Chinese purchases of US soybeans now looks increasingly remote. China is reportedly covered for soybean imports through to December, leaving only a narrow window for US exporters before South American new-crop supplies return to market.
Financial markets reeled on the tariff news, with equities, commodities, and cryptocurrencies all sharply lower before staging a partial recovery as rhetoric softened. Agricultural commodities, however, remain under pressure.
It is becoming increasingly evident that the US will need to diversify markets if it has any hope of staving off a longer-term slide in agricultural commodity prices (mainly soybeans). Increasing domestic crushing could be a longer-term solution, assuming biofuel mandates are retained or increased. This does then raise questions over Canada’s canola crush and export volume into the US. Corn and wheat exports out of the US continue to overperform, which is a glimmer of hope for US farmers.
Elsewhere in the oilseed complex, Indonesia is reportedly considering lifting its biodiesel blend rate from B40 to B50, a move aimed at achieving diesel self-sufficiency. Such a shift could tighten export availability of palm oil, the world’s most traded vegetable oil. Palm oil prices have already surged around 23% since May, driven by strong domestic consumption and robust demand from India and China.
Unfortunately for canola, prices have not shared in the rally. Ample supply from Europe and Canada and uncertain global demand have kept the market largely anchored despite strength in related oils.
The week ahead….
Looking forward, the market will price in sentiment from high-level talks with China. Importer interest appears to be awakening, with several alternative origins (other than Russia) being awarded tenders.
Have any questions or comments?
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Click on graph to expand
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Data sources: Reuters, Ukr Agro Consult, Zaner Ag, Next Level Grain Marketing, Mecardo
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Have any questions or comments?
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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.