Grains are mostly higher early Wednesday, with livestock markets mixed.
Kevin Duling, KD Investors, says grains are shaking off the news of an escalation of the trade war with China as they announced overnight they would be placing an additional 50% retaliatory tariff on U.S. goods, including ag.
That’s after President Trump raised tariffs to a total of 104% on China.
The EU also hit back this morning, announcing $23 billion of retaliation on a list of products from the U.S. yet to be detailed.
Duling thinks grains are holding up for a couple of reasons.
First off, China has not been a big customer for U.S. corn or wheat and this is really a story for new crop soybeans as China has seasonally switched purchases to South America.
Additionally, the USTR Jamieson Greer told the Senate Finance Committee yesterday they were negotiating with over 50 countries trying to avert tariffs.
That was updated after the hearing to 70 nations and USDA Secretary Brooke Rollins followed up by saying they expected some annoucements on trade deal by the end of the week.
Greer also said the White House was considering adjusting the port fees on Chinese origin ships due to the overwhelming negative response from U.S. businesses.
Old crop corn also has tight ending stocks and that should be confirmed in Thursday’s WASDE according to Duling.
At least for wheat Duling also thinks the pop in prices is tied to margin call requirements as the funds are heavily short in the wheat market and are likely needing to generate cash and covering those positions.
He adds that wheat demand has been strong and right now the U.S. has the best supply and competitive prices.
Weather has also supported the wheat and corn markets with flooding in the south eastern Midwest.
Live cattle are down continuing to see to see fund liquidation.
There has been some chart damage done and Duling says it is possible if the stock market keeps bleeding that the funds may continue to liquidate their extremely long position in cattle, despite strong fundamentals.
