Chicago | Reuters — Chicago Board of Trade soybean and corn futures plummeted to new contract lows on Monday — with soy plunging to the lowest levels seen in nearly eight months — after U.S. President Donald Trump said he would raise tariffs on Chinese goods this week, clouding prospects for a trade settlement between the world’s two largest economies.
The U.S. tariff threat, which sparked broad selling on equity and commodity markets, added to recent pressure on soybeans linked to expectations that U.S. farmers will switch some areas from corn to soybeans.
Corn, which rallied last week as rain hampered planting in the U.S. Midwest, also fell sharply on Monday, as the renewed trade tensions between Washington and Beijing cooled hopes of a deal that would boost U.S. grain exports to China.
U.S. wheat futures also fell on Monday.
Trump said on Sunday that tariffs on $200 billion of goods would increase to 25 per cent on Friday, reversing a decision he made in February to keep them at 10 per cent due to progress in trade talks (all figures US$).
The president also said he would target a further $325 billion of Chinese goods with 25 per cent tariffs “shortly,” essentially covering all products imported into the U.S. from China.
“It took just a couple sentences to get all that damage done on the markets,” said Jack Scoville, a futures market analyst at the Price Futures Group.
The announcement, which Trump posted on his Twitter account on Sunday, soured expectations that the sides were near an agreement to resolve a trade standoff, although China said on Monday that a delegation was still preparing to go to the U.S. for a new round of talks.
Chicago soybean futures dropped sharply as the U.S. market opened on Monday, but then recovered slightly from new contract lows later in the morning on technical buying.
“The market has always had this feeling that we’re going to get a deal done with China,” Scoville said. “But today, I think we’re seeing what would happen to this puppy if we don’t – and it’s really ugly.”
Chicago Board of Trade (CBOT) July soybeans on Monday closed down 12 cents at $8.30-1/4 a bushel, after hitting a contract low of $8.16-3/4 earlier in the day.
The slump added yet another negative note for soybeans in what has been weeks of woe: On Friday, the contract was down 2.9 per cent in the week.
Soybeans are the most valuable U.S. agricultural export to China, which had been the top buyer of U.S. soybeans prior to the trade war. Pledges by Beijing to increase imports of U.S. farm goods had raised expectations it would also start buying significant amounts of U.S. corn and wheat.
CBOT July wheat closed Monday down 3/4 cent at $4.37-1/4 a bushel, while CBOT July corn futures closed down 6-1/2 cents at $3.64-1/2 a bushel.
Corn broke an eight-session rally on Monday that had been fueled by concerns over lost plantings and reduced yield potential due to excess moisture this spring.
More rain is expected around the U.S. Midwest this week, which could further hamper corn planting and raise the chances of some land being switched to later-planted soybeans.
— Reporting for Reuters by P.J. Huffstutter in Chicago; additional reporting by Gus Trompiz in Paris and Emily Chow in Kuala Lumpur. Includes files from Glacier FarmMedia Network staff.