ICE canola futures slip, soybeans plunge to near-8 month low on Trump tariff threat to China

(Reuters) – ICE canola futures lost ground on Monday, dragged lower by soy weakness after U.S. President Trump threatened bigger tariffs against China.

* Statistics Canada is expected on Tuesday to estimate total Canadian canola stocks as of March 31, 2019 of 10.2 million tonnes, up 1.1 million tonnes from a year earlier.

* July canola lost 20 cents to $432.40 per tonne. Weakness in the Canadian dollar limited canola’s losses.

* July-November canola spread traded 4,682 times.

* Chicago July soybeans fell on U.S. President Trump’s threat to increase tariffs.

* Paris Matif August rapeseed futures and Malaysian July palm oil futures slipped.

* The Canadian dollar weakened to a 10-day low against its U.S. counterpart on Monday as investors worried about a potential escalation of the trade dispute between the United States and China that could hurt the global economy.

Chicago Board of Trade soybean and corn futures plummeted to new contract lows on Monday – with soy plunging to the lowest levels seen in nearly eight months – after U.S. President Donald Trump said he would raise tariffs on Chinese goods this week, clouding prospects for a trade settlement between the world’s two largest economies.

 

The U.S. tariff threat, which sparked broad selling on equity and commodity markets, added to recent pressure on soybeans linked to expectations that U.S. farmers will switch some areas from corn to soybeans.

Corn, which rallied last week as rain hampered planting in the U.S. Midwest, also fell sharply on Monday, as the renewed trade tensions between Washington and Beijing cooled hopes of a deal that would boost U.S. grain exports to China.

U.S. wheat futures also fell on Monday.

Trump said on Sunday that tariffs on $200 billion of goods would increase to 25 percent on Friday, reversing a decision he made in February to keep them at 10 percent due to progress in trade talks.

The president also said he would target a further $325 billion of Chinese goods with 25 percent tariffs “shortly,” essentially covering all products imported into the United States from China.

“It took just a couple sentences to get all that damage done on the markets,” said Jack Scoville, a futures market analyst at the Price Futures Group.

The announcement, which Trump posted on his Twitter account on Sunday, soured expectations that the sides were near an agreement to resolve a trade standoff, although China said on Monday that a delegation was still preparing to go to the United States for a new round of talks.

Chicago soybean futures dropped sharply as the U.S. market opened on Monday, but then recovered slightly from new contract lows later in the morning on technical buying.

“The market has always had this feeling that we’re going to get a deal done with China,” Scoville said. “But today, I think we’re seeing what would happen to this puppy if we don’t – and it’s really ugly.”

Chicago Board of Trade (CBOT) July soybeans were down 12-1/4 cents at $8.30 a bushel at 11:13 a.m. CDT (1613 GMT), after hitting a contract low of $8.16-3/4 earlier on Monday.

The slump added yet another negative note for soybeans in what has been weeks of woe: On Friday, the contract was down 2.9 percent in the week.

Soybeans are the most valuable U.S. agricultural export to China, which had been the top buyer of U.S. soybeans prior to the trade war. Pledges by Beijing to increase imports of U.S. farm goods had raised expectations it would also start buying significant amounts of U.S. corn and wheat.

In midday trading on Monday, CBOT July wheat was down 3/4 cent to $4.62-1/2 a bushel, while CBOT July corn futures were down 6-3/4 cents at $3.64 a bushel.

Corn broke an eight-session rally on Monday that had been fueled by concerns over lost plantings and reduced yield potential due to excess moisture this spring.

More rain is expected around the U.S. Midwest this week, which could further hamper corn planting and raise the chances of some land being switched to later-planted soybeans.

Traders were awaiting the U.S. Department of Agriculture’s weekly crop progress report later on Monday to gauge the extent of planting delays.

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