Grains are lower early Wednesday with livestock recovering after a down day on Tuesday.
Tomm Pfitzenmaier, Summit Commodity Brokerage, says grains are seeing pressure on new tariff concerns with the EU after the U.S. imposed 25% tariffs on steel and aluminum on countries around the world.
The EU launched “swift and proportionate countermeasures,” planning to impose its own duties on up to $28.3 billion worth of American goods, including poultry, beef, some seafood, nuts, eggs, sugar, vegetables and other goods.
The tariff battle with Canada is escalating, which is also a concern as officials have mentioned ethanol as a possible target for counter levies and Pftizenmaier says Canada is one of the top export customers for U.S. ethanol.
The uncertainty on trade and the recent melt down in the stock market on talk of recession has speculative traders exiting positions.
Pftizenamaier says index and commodity funds were buying agricultural commodities as a hedge against inflation but that trade has turned sour with the talk of recession and so they are reversing course.
The CPI data out Wednesday morning confirmed inflation is at bay coming in at 2.8% and slightly below expectations.
The soybean complex was also weighed on by the news of biodiesel plant shutdowns.
The expiration of the $1-per-gallon blenders tax credit on Dec. 31, 2024, has led to the shutdown of multiple biodiesel plants in Iowa. Industry leaders face uncertainty as the Treasury Department has yet to finalize rules for the replacement 45Z Clean Fuel Production Tax Credit.
May corn took out support at the 100 day moving average level of $4.64 3/4 and now needs to hold the 200 day moving average.
May soybeans were unable to hold the $10.00 support area and Pfitzenmaier says $9.90 will be the next level of support.
Cattle futures are recovering early Wednesday with some stabilization in the stock market.
Cattle had been holding up fairly well with the correction in equity markets but were finally pulled down in Tuesday’s session.
Pfitzenmaier thinks the cattle market will be well supported with the recent strong cash and the discount the futures are holding to it.
Lean hog futures are also higher in tandem with cattle and again watching outside markets.
The market has had a nice recovery off the lows but hit the 50% retracement level yesterday and so now he is unsure of what direction the market is headed.
Some of the course will be determined by the ability to keep Mexican tariffs off the table long term.
