US Tariff’s back on the agenda

The corresponding countries will have little choice to either match – tit for tat style – tariffs on US goods that are imported or bend to whatever demands are being made.

Impacts on the markets are already being felt. Canadian canola (ICE) has dropped something like AU$50/t in the past week in anticipation of the tariffs being implemented. Crude oil has dropped as the threat of a global trade dispute dampens hopes of an economic revival. Metals including copper, silver and rare earths are also feeling the pinch.

It may not be all bad news. There is likely to be increased volatility across commodity markets which can provide opportunity. In the short term, there would appear to be a need for some strategic redirection of trade routes which might cause disruption to supply chains. There is much to unfold in the coming weeks and months.

Earlier this week, Argentina announced it would cut the export taxes of corn, soy and wheat. The implication here is that an already cheap source of agricultural goods would see a surge in export activity. This added to some weight being felt on ag markets. Countering the pressure being felt here, was the fact that Argentine weather has seen corn and bean production pared back. Soybeans, later sown and perhaps more at the mercy of the dry conditions may be trimmed further. Corn, while reduced, is still at the upper end of production estimates.

Finally, finishing on a brighter note, the wheat market is showing signs of life. Russian exports have slowed to a crawl ahead of the self-imposed export quota. Import tenders are starting to line up. US wheat exports are up. Corn prices have pushed higher making feed wheat an attractive option into SE Asian markets – a key demand source to put a floor in wheat bids. And all the while Chinese business has the ‘Do Not Disturb’ sign up for their New Year celebrations for another week.