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US grain prices have fallen sharply as retaliatory tariffs on the country’s agricultural exports fuel fears of a supply glut and draw ire from farmers.
Corn, wheat and soyabean prices in Chicago have dropped this week after China and Canada said they would impose a range of tariffs on US foodstuffs while Mexico, the biggest market for US corn, said it planned to announce its own countermeasures this weekend.
“If Mexico stops buying US corn, there will be a surplus, creating more availability for other countries,” said Carlos Mera, head of agricultural commodities at Rabobank, “That will push down prices.”
Contracts tracking corn have fallen from nearly $5 per bushel about a month ago to $4.36, while soyabeans are down from $10.75 to $9.90 per bushel. Wheat prices also fell from above $6 per bushel last month to below $5.20 in Chicago on Wednesday.
The sharp falls come after China announced on Tuesday that it would impose a 10 per cent tariff on soyabeans, sorghum, pork and beef, alongside a 15 per cent levy on chicken, wheat, corn and cotton. As the world’s biggest pork producer, China accounts for more than 40 per cent of US soyabean sales. Both soyabeans and corn are primarily used for livestock feed.
Canada also set 25 per cent levies on American imported grains, meat and dairy products on expectations of an influx of US supply.
The retaliatory tariffs come in response to US President Donald Trump’s decision to impose 25 per cent duties on imports from Canada and Mexico and to raise tariffs on China to 20 per cent, as the US agriculture trade deficit heads towards a record $49bn this year.
Mexico is a big buyer of US wheat, which it uses mainly for milling to make flour. Prices have also retreated on speculation over a peace deal between Ukraine and Russia, brokered by Trump. Ukraine is one of the world’s biggest grain producers.
The trade war has prompted a backlash from US farmers, who have had their incomes plummet over the past three years as prices tumble and cost of inputs, such as fertiliser and seeds, has gone up. They have also been hit by Trump’s freeze on funding from the Inflation Reduction Act, which supported sustainable agriculture projects.
“Farmers are facing a troubling economic landscape due to rising input costs and declining corn prices,” said Kenneth Hartman Jr, president of the National Corn Growers Association. “We ask President Trump to quickly negotiate agreements with Mexico, Canada and China that will benefit American farmers.”
However, the US Agriculture Department reported an increase in the projected corn planting area to 94mn acres, exceeding market expectations.
The larger-than-expected acreage prompted speculative funds, which had built near-record long positions in corn, to unwind their bets. Adverse weather in Brazil and Argentina, coupled with Mexico accelerating corn imports ahead of tariffs, had previously drawn hedge funds into the market.
Andrey Sizov, managing director of grain consultancy SovEcon, expressed scepticism over a surge in wheat supply but said reduced freight costs for Ukrainian grain could lower prices. “The insurance premium currently factored into shipping costs is substantial,” he said.
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