Analysis Grains & Commodities
Is Trump's Trade War Playing into Brazil's Hands?
On the grain market, players were still in the grip of Trump's 'Liberation Day' yesterday. While the markets for corn and wheat recovered from the initial shock fairly quickly, things were a bit different for soy. It almost seems as if the market assumes that we will have a more or less repeat of the scenario from Trump's first term. At that time, China took very targeted measures against the soy sector in the US. Brazil has not become any less so.
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Choose the subscription that suits youThe May wheat contract on the Matif closed yesterday €1 lower at €221 per tonne. On the CBoT, wheat also took a step back with a minus of 0,6% to close at $5.36 per bushel. Corn was almost unchanged with a decrease of a quarter cent. With that, corn closed on the CBoT at $4.57½ per bushel. The biggest movement during the last trading session, however, was in soybeans. The May contract most lost a big spring and closed 1,7% lower at $10.11½ per bushel.
The import duties that US President Donald Trump presented on Wednesday kept players on the grain market quite busy. Wheat and corn showed some recovery on the CBoT after the initial shock. This is different for soy. Due to the broad import duties of 10% that Trump came up with, with a tariff of 20% for the EU and a levy of 54% for China on most products, there is fear that countermeasures will not be long in coming. In the previous trade conflict in Trump's first term, soy was targeted quite specifically in the countermeasures.
Traders and analysts are already preparing for such a scenario. In the US, people are mainly looking at China, but Europe could also hurt US soy exporters. According to data from the European Commission, 5,3 million tonnes of soy were imported from the US this season, which is more than half of European soy imports. This is comparable to last season. Brazil is in second place with 2 million tonnes, a market share of just under 3,0% on the European market, which is also comparable to last season. It is not inconceivable that Europe will examine the import of soy from the US and possibly want to impose restrictions on it.
Dominant position South America
Fefac, the European federation of feed producers, is concerned about this, as evidenced by the statement of the organisation in which it calls for important feed raw materials such as soy to be kept out of possible counter-sanctions. Whether the Fefac's concern is justified is another matter. If we look at the import figures of soybean meal from the European Commission, the dominance of South America is striking. With over 12 million tonnes, two-thirds of the soybean meal in the EU comes from Brazil and Argentina.
Brazil could end up laughing in the trade war that is now raging. Brazil was already a major player in the international soy market and that position could be strengthened now that some buyers are turning away from the US.
On the wheat market, the weather forecasts are fairly balanced. In our regions, it is on the dry side. That is annoying for the newly sown beets and onions, but does little damage to the wheat. In Ukraine and the south of Russia, where the autumn and winter have been very dry, some rain has already fallen in the past few days and according to the weather models, more rain is forecast. In the US, rain has also fallen in the dry wheat belt, but the showers there seem to be over after the weekend. In the slightly longer term, the American weather service expects a return of the warmer and above all dry weather type.
