Analysis Grains
Trade War Trump is a Reality
In European politics, there is panic now that military support from the US to Ukraine is in jeopardy. In the (financial) markets, it is mainly the trade war that makes players nervous. After the closure of the Matif and CBoT, Trump announced an import duty of 25% for Canada and Mexico starting March 4 (today). He also proposes an additional 10% duty for China. Both Canada and China have responded with countermeasures. This seems to have made a trade war a reality.
The March contract for wheat on the Matif closed €4.25 lower at €217.50 per ton yesterday. On the CBoT, wheat lost 0.9% and ended at $5.32 per bushel. Corn was the biggest decliner in the last trading session, closing 2.9% lower at $4.40¼ per bushel. Soybeans also ended in the red with a 1.3% decrease to $9.98¼ per bushel.
The big news for the grain market (and financial markets in general) came at the end of the day, after the CBoT closed. As of today (Tuesday, March 4), Donald Trump has imposed a 25% import duty on a wide range of products from Canada and Mexico. Additionally, Trump increased the duty on products from China by 10 percentage points to 20%. This rate is in addition to the existing duties on products from China. "President Trump has given Canada and Mexico ample opportunity to address the dangerous cartel activities and the flow of deadly drugs into our country, but they have failed to address the situation adequately," the White House wrote when announcing the tariffs.
Countermeasures
China quickly responded to the increase in US import duties. Beijing announced today a 15% duty on poultry, wheat, corn, and cotton from the US. Furthermore, there will be a 10% duty on sorghum, soybeans, pork, beef, fish, vegetables, fruits, and dairy products. The Chinese Ministry of Commerce also reported that fifteen American companies will be on the list of companies that Chinese companies cannot easily supply to.
During a regular press conference of the Chinese Ministry of Foreign Affairs, the ministry's spokesperson stated that China will fight to the bitter end if the US insists on a tariff war, a trade war, or any other form of war. "I want to reiterate that the Chinese people have never been afraid of evil or ghosts, and we have never succumbed to bullying. Pressure, coercion, and threats are not the right ways to deal with China. Trying to exert maximum pressure on China is a miscalculation and a mistake," various media outlets quoted the spokesperson as saying.
Canadian Prime Minister Justin Trudeau announced a few hours before Trump's decision that Canada can respond immediately to trade restrictions from the US with tariffs on $30 billion worth of goods from the US. On March 25, a second package could be added that affects $125 billion worth of American goods. "Canada will not leave this unjust American policy unanswered," Trudeau wrote in a statement.
The imposition of tariffs yesterday does not seem to be the end. Last week, Trump signed an executive order to investigate unfair trade practices in the forestry and timber industry. Yesterday, he hinted at additional tariffs on the import of agricultural products to stimulate domestic sales. Furthermore, there are still trade barriers looming over the EU market.
Military Support
Another piece of news from the White House is the uncertainty about American support for Ukraine after the dispute between Trump and Zelensky last Friday. According to the White House, Zelensky is not willing to compromise for a ceasefire. Military support from the US is therefore in jeopardy, and Trump wants to suspend the delivery of weapons and other promised aid. Ukraine urgently needs that support, as evidenced by the attack on the strategically important grain port of Odessa last weekend.
Australian Wheat Harvest Larger Than Expected
We almost forgot, but in addition to the news from Washington, Beijing, and Ottawa, there is of course more happening in the grain market. Abares, the statistics and research service of the Australian Ministry of Agriculture, has increased the estimate for the Australian wheat harvest for the 2024/25 season by 2.2 million to 34.1 million tons. This makes the harvest 31% larger than the previous season. For the 2025/26 season, Abares estimates the wheat harvest at 30.5 million tons.
Bulls Ignored
There is also bullish news for the wheat market, but some analysts say there is very little attention paid to it. Rusagrotrans announced yesterday that Russian grain exports in February dropped to the lowest point in five years. The company reported that 1.93 million tons of wheat were exported last month.
LSEG issued a warning that in the major wheat-growing regions in India and China, hot and dry weather is expected in the next two weeks. Especially in India, there are concerns that the wheat will mature early and as a result, the yield will significantly lag behind the multi-year average. India already has a tight wheat supply, and if the upcoming harvest yields disappoint, it may be forced to import wheat.
