WINNIPEG (CNS) – Soybean futures on the Chicago Board of Trade suffered sharp losses on Wednesday, April 4, after China said it would slap a 25 per cent tariff on soybean imports in retaliation for U.S. sanctions that had been placed on it.
The dominant May contract plummeted 55 cents to US$9.83 a bushel, before bargain-hunters stepped in and staunched the bleeding. By mid-morning, the contract had moved above the psychologically-important US$10 mark, which lent some support to values. It ultimately settled at US$10.15 a bushel, down 22 cents for the day.
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According to written comments from Terry Reilly of Futures International, a future test of US$9.40 per bushel basis for the nearby contract isn’t out of the question.
He added soymeal could also be pressured down to around the US$340 to US$350 per tonne level. Soyoil could dip to a range of 30.4 to 30.6 U.S. cents per pound.
The tariffs don’t kick in immediately though, lending support to the notion cooler heads could prevail and a settlement could be reached.
Reilly points out China is also sitting on roughly 5.75 million tonnes of soybeans at its ports, which is enough to keep a 1.65 million tonne/crush rate going until the end of the month.
The Chinese tariffs could have hit at a worse time too, as market participants had already started to shift their focus to South America.
Closer to home, the soybean basis should improve for Canadian farmers as a result of increased interest in Canadian supplies. According to Bruce Burnett of Markets Farm, with the seasonal start-up of the port of Thunder Bay, getting supplies from railcars to ships should speed up.
As for corn, the market sank in sympathy with soybeans. The May contract fell 16 cents to US$3.72 a bushel.
There is speculation that once the initial shock of the tariffs wears off, corn could take back the ground it lost and even move a bit higher.
Reilly notes China has already shut off imports of U.S. ethanol so that is already baked into the market. Anti-dumping duties also exist on U.S. sorghum.
In recent weeks buying had kicked in once the May contract dropped below the US$3.72 level, but all bets are off. The market may try and carve out a new range for itself with the shakeup done to the agricultural markets by China.
