Porto Alegre, March 11th, 2025 – In addition to concerns about possible retaliation from Mexico and Canada, China has revised its position about the trade war. Besides taxing US agricultural products with additional tariffs of 10 to 15%, it has also imposed heavy and retaliatory tariffs on Canada. Brazil is trying to remove some import taxes on US products, in an attempt to escape the trade dispute environment, and can eliminate the import tariff on ethanol. Amid this turbulent situation, markets are trying to price something in. With China’s taxation, the market preferred to reduce corn prices but maintain high soybean prices on the CBOT. This was a rather erratic movement, especially since China has imported very little corn from the US for four years, while the US is dependent on China for soybeans. However, the adjustment of corn prices should not last long, as lower prices should once again boost exports and reduce stocks.
China imposed additional tariffs of 10 to 15% on some US agricultural producers last week, in line with what had already been signaled, but which the market did not expect. Among the products taxed are corn and soybeans. So, now US products will pay a 10% tariff to reach the Chinese market. Some points need to be reflected in this environment, such as:
– China is still very dependent on US soybeans while South America is not yet able to meet all Chinese demand;
– Tariffs are imposed, but as seen after the episode of the taxation in 2018, it is understood that Chinese trading companies may end up being exempted from this cost by their government. In this case, only foreign trading companies would be subject to taxation. This space still allows China to participate in purchases in the US without additional tariff costs, where the most affected are non-Chinese trading companies;
– In the case of soybeans, the immediate impact could have been a sharp decline in prices on the CBOT, which did not happen due to this commercial space made possible by Chinese trading companies. However, weekly sales from now on will determine whether China will still buy soybeans from the United States or not. Otherwise, prices could plummet on the CBOT.
– In the case of corn, the trading procedure is the same. However, in the last four years, China has made very few purchases of corn from the United States, so the tariff has zero effect on prices;
– Even so, prices on the CBOT chose to take into account the non-existent risk from the reality of strong U.S. sales this year. The decline to USD 4.60/bushel is not justified by the Chinese action, but rather by concerns about Mexico;
– At this point, Mexico has taken measures that show a more conciliatory than confrontational attitude, including allowing the imports of GM corn that was in the process of being banned by the local left-wing government. Other measures such as the transfer of traffickers to the United States, border patrols, and immigration controls appear to be underway. Therefore, there is little chance of Mexican tariff retaliation against U.S. products, such as against corn, for example.
In short, China’s tariffs do not change the corn market and Mexico, which would be the greatest risk, is in the process of adapting to US requirements. The decline in the CBOT from almost USD 5.00 to USD 4.60/bushel is not expected to last long. This is because weekly US exports remain very strong, USDA will need to revise its annual export projection upward, and there will be a cut in the new crop stocks.
In parallel with all this, the market is also starting to focus on the Planting Intentions report to be released on the 31st, when the real planting outlook will be disclosed to the market. The bias is well defined, that is, an increase in corn area to the detriment of soybeans. The question is the percentage of this transition of these two crops in this next season. The initial expectations for the weather in the spring in the Midwest are for normal to above-normal rainfall.
Meanwhile, Argentina is starting its harvest, with 6% complete, in the north of the country. The rain in the first week of March in the Core region was perfect, involving 10 to 250 mm. Of course, this does not eliminate the problems that have already occurred over the season, but it certainly eliminates the bias of significant losses for this year’s Argentine crop, which should reach nearly 48 to 49 mln tons.
Safras News
