Grain and hog markets end sharply lower Tuesday, with cattle holding gains.
Jim McCormick with AgMarket.Net says the grain markets made new lows for the move with a risk off day that featured fund liquidation and technical selling pressure.
It was triggered by announced retaliation by China, Mexico and Canada to the U.S. tariffs that kicked in on Tuesday.
President Donald Trump’s new tariffs on imports went into effect at 12:01 a.m. ET Tuesday, marking a significant escalation in global trade tensions
China put retaliatory tariffs on a list of U.S. ag products including 25% levies on corn, wheat and cotton, plus 10% tariffs on soybeans.
Mexico is also announcing counter measures over the weekend and has vowed to include ag products.
That sent corn, soybeans, wheat and hogs to new lows for the move as funds liquidated more of their long position in corn and added to their short position in soybeans and wheat.
How long will it take for the market to stabilize?
McCormick says, “I think we will see pressure through at least the end of the week, unless something changes with the tariff negotiations.”
He says this tariff war is somewhat different than in 2018 as it includes not just China, but also Mexico and Canada which are all top trading customers for the U.S.
Significant technical damage was done to the grain charts and McCormick thinks that could lead to additional selling unless President Trump is able to reach a deal with any of the affected countries.
McCormick speculates that President Trump is using the tariffs as not just a way to balance trade but to finance tax cuts.
The war could result in higher inflation and cause the Fed to pivot on interest rates which would cause further liquidation of index funds.
Lean hog futures also suffered significant losses as Mexico may put tariffs on U.S. pork imports and it is the top market for U.S. product.
Cattle bounced into the close as tariffs on Mexican feeder cattle and beef imports would further tighten supplies.
Additionally, the futures are at a discount to the cash trade, which has been quiet this week.
