Grains end lower on Wednesday with livestock futures mostly higher.
Alan Brugler with A&N Economics, LLC. says the tariff escalation once again weighed on the grain markets.
After the U.S. raised tariffs on Canadian steel and aluminum imports from 25% to 50% with 25% tariffs on the EU, both struck back with retaliation.
The Canadian government even mentioned ethanol imports from the U.S. could be in included in a second layer of reciprocal taxes which hurt the corn market as Canada is a top customer.
Europe is also targeting ag goods and announced Wednesday that they would slap a 25% tariff on corn, soybeans, and wheat beginning on April 1. U.S. corn sales into the EU were reported to be close to 100 million bushels for 2024-25.
The plunge in corn futures took out key chart support on the May contract and Brugler says the next area that needs to hold is $4.63.
The EU is also retaliating with tariffs on many U.S. ag goods as a response to the 25% tariffs the U.S. imposed on steel and aluminum.
News of 5 of Iowa’s 10 biodiesel plants being shuttered due to uncertainty about biofuels policy also weighed on the soybean complex.
The $1 per gallon biodiesel blenders tax credit expired at the end of 2024 and there is no bridge to the next round of tax incentives as the 45Z program is still in limbo.
Brugler says with increased tariffs on China and a likely switch to even more South American sourced soybeans this leaves the U.S. with no domestic demand certainty in the form of biofuels or added crush.
May soybeans closed right above psychological support at $10 and if this area is breached the market could fall as low as $9.62.
Wheat futures also fell victim to speculative selling but the market was also suffering a hangover from the higher ending stocks USDA printed in the March WASDE for both U.S. and global supplies.
Stats Canada also indicated more acres of wheat would be planted in Canada this year than expected at 27. 5 million, which is up over 700,000 from last year.
Brugler says speculative money has been moving out of the ag markets as a result of traders needing to make margin calls on losses in the stock market but also with fading inflation concerns and increasing tariff battles.
Cattle futures soared with the stabilization in the stock market, lower corn prices and hopes for higher cash trade again this week.
So far, only light cash cattle activity has been reported in Kansas at $200.00, roughly steady with week-ago.
Plus, Brugler says if the U.S. does put tariffs on Canada that would actually lower the amount of beef imported into the U.S. at a time when supplies are tight.
That might force a shortage of ground beef which would require more whole muscle cuts to be ground for hamburger.
Feeders were up $3 and some back months made new highs on the tariff news and lower corn prices.
The cattle market has held up well despite the correction in the stock market and Brugler thinks it will be well supported as long as cash can hold together and the economy can avoid recession fears.
