There is a lot to say about President-elect Donald Trump, but it is certainly not boring. Now he managed to surprise the market with import duties. Exporters in Canada and Mexico will have to pay a 25% levy, Trump announced via his own social media channel Truth. And for Chinese exporters he announced an additional 10% levy. Soybean oil reacted most strongly to the news. That could become competitive if the levy makes used cooking oil and rapeseed too expensive for blending in biodiesel.
The December wheat contract on the Matif closed yesterday €2 higher at €216,25 per tonne. On the CBoT, wheat closed 0,7% higher at $5.39½ per bushel. Corn took a step back, closing 1,1% lower at $4.20 per bushel. Soybeans were mostly sideways, losing 0,2% to close at $9.83½ per bushel.
After China, Trump now has Mexico and Canada in his sights. "On January 20th, as one of my first presidential acts, I will sign all necessary documents to impose a 25% tariff on ALL products entering the United States and the ridiculous open borders that come with it," Trump wrote on his social media platform TruthThat tariff will remain in effect until no more drugs (specifically fentanyl) and illegal immigrants enter the U.S.
Undermining free trade agreement
The hard line towards Canada in particular comes as a surprise to many analysts. There have been trade tensions between Canada and the US before. The last time trade barriers were threatened was in the negotiations on what eventually led to the US-Mexico-Canada Agreement (USMCA). This is the successor to the NAFTA agreement that was ratified by Trump in 2020 during his previous term. The US is an important sales market for both Canada and Mexico. 83% of Mexico's exports go to the US and for Canada, the US accounts for 75% of its exports.
In another message, Trump writes that he is working on "an additional 10% tariff, on top of all the additional tariffs" on imports from China. It is not entirely clear whether that is on top of the 60% import duty that Trump has previously touted.
Soybean oil was on the rise last trading session due to the statements. Traders and speculators expect that more soybean oil from the US will be used for the production of biodiesel. Due to Trump's plans, used cooking oil from China and rapeseed oil from Canada become more expensive for use in fuel. The fact that the price of soybeans is not rising is because a good demand for soybean oil is lurking for overproduction of soybean meal. This is putting pressure on the yield of the soy processors.
Small stock of wheat among Russian farmers
Wheat was boosted by news from Russia in the last trading session. According to SovEcon, the amount of wheat in growers' storage is 20% lower than last year. In total, there are 21,8 million tonnes of wheat in growers' storage this season, according to the market bureau. In the south of Russia - where most wheat for export comes from - stocks are 26% lower than last year and the amount of wheat is the lowest in four years. Analysts therefore expect the high export rate of Russian exporters to slow down in the coming period.
According to analysts, the high inflation (well above 20%) in Russia also plays a role in the small wheat stocks of Russian farmers. More money can be earned with money in the bank than with speculating that the grain price will move, some analysts say. And perhaps even more important: borrowing money for the inputs for the coming harvest costs Russian farmers a lot of money.