Daily Market Commentary

02-03-2025

Morning Comments

US places tariffs on Canada, Mexico and China, the 3 largest US ag export markets. Canada and Mexico responding with counter tariffs on US products. Trump signed three executive orders imposing 25% tariffs on Mexican and most Canadian imports and 10% on goods from China, starting on Tuesday. Mexico and Canada, the top two U.S. trading partners, immediately vowed retaliatory tariffs. Mexico is the biggest importer of U.S. corn China is the No. 1 market for U.S. soybeans. Retaliation from China, Canada and Mexico, the top three export markets for U.S. farm products, would hurt the $190 billion U.S. agricultural export sector. The top three markets for American farm products imported a total of $94 billion in U.S. agricultural goods in 2023. Retaliatory tariffs during Trump's first term resulted in around $27 billion in lost U.S. agricultural exports, including $25.7 billion in sales to China, according to Rabobank analysts.

tariff concerns could derail the corn market’s sharp rally over the past month, which was driven by escalating concern drought in Argentina and active speculator buying.

Nearby corn and soybean spreads narrowing (see charts below) with US farmer selling expected to dry up now with the lower futures prices. Grain futures dropped sharply at the outset of overnight trading in the wake of President Trump’s weekend order for sweeping tariffs on goods from Mexico, Canada and China. Corn futures took it the hardest, gapping lower on the daily charts and hitting a three-week low. Speculators have built their most bullish position in the corn market in almost three years. Is this enough to make them turn tail?

we are likely to see retaliatory tariffs on U.S. agriculture products which could distort trade flows," according to Reuters. New trade tensions threaten to squeeze U.S. farmers as retaliatory measures loom. President concedes American consumers can expect to feel “some pain,” 

Weather forecast for South America more favorable with some drier weather for Brazilian soybean harvest progress while Argentina to see rains late in the 6-10 day period. Brazil soybean harvest is 9% complete according to AgRural vs 16% this time last year. Safras estimates the soybean harvest at 8% complete vs 12% on avg and 16% complete last year. This morning estimates the Brazil soybean crop at 174 mmt, up from its previous estimate of 170.8 mm. If the weather turns to the favorable side over the next two months in Argentina, the Chinese won't be needing as many of our soybeans as usual in October. As with corn, the funds are too long given the current fundamentals, which will ultimately become a large negative if Argentina and Rio Grande do Sul turn definitively to the wetter side in the coming days and weeks.

John R. Anderson

Vice President of Grain

Farmers Union Cooperative

563-380-2311

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