Tariffs are applied, and anticipated retaliation is occurring.

This morning’s grain trade is sharply lower due to the application of tariffs against Mexico, Canada, and China, which was enacted this morning. This is generating new grain selling, with corn, soybean, and wheat futures all lower amid tariff retaliation.

China retaliated in a measured fashion with tariffs of up to 15% on US exports of farm goods and additional trade curbs. 15% of China's import tariffs were on chicken, wheat, corn, and cotton. 10% tariffs were put in place on sorghum, soybeans, pork, beef, dairy products and seafood. Beijing also placed 10 firms on the unreliable entity list, which bars them from making new investments in China, with 15 US firms on the export control list, including US aerospace and defense contractors. It’s thought that this will help produce future trade negotiations with China.

Along with the US suspensions, China suspended three US entities that deal in soybean exports, including CHS, LDC, and EGT LLC. No reason for the soy export suspensions was mentioned, but China also suspended US log imports, citing pests found in shipments.

China has some open soybean purchases of 1.5 MMTs on the books, with an estimated 400,000 MTs being exported this week. The Chinese tariff starts March 10, which would allow soybean export inspection failures to drop below 1 MMT. Meanwhile, China has no open sorghum, corn, or wheat purchases on the books with US exporters.

Canada also announced sweeping retaliatory tariffs against US goods. The first stage is 25% tariffs against $20.6 Bil of US goods, with a second round of 25% tariffs placed on $125 Bil of US goods, which include big-ticket items like cars, trucks, steel, and aluminum. Annual US and Canadian trade is $900 $Bil, with proposed Canadian tariffs amounting to 17%.

While this occurs, weather forecasts are turning negative for eastern Brazil, where soil moisture is in sharp decline with an estimated 30% of the Brazilian winter corn crop planted there. There is also less certainty of rain in the 11-15 day forecast. Near normal rainfall occurs across Mato Grosso and Mato Grosso do Sul. Temps there will be warmer than normal in the mid-80s to mid-90s due to southern and eastern Brazil's lack of cloud cover. Meanwhile, Argentina does have a chance for daily showers. 90° will be commonplace across eastern and southern Brazil into March 10.

The grain trade has been in a sharp precipitous decline for nine days on sheer panic of the tariff news, and as almost like the point of throwing the baby out with the bathwater. It is likely that with so much tariff combativeness in play, trade negotiations will be occurring soon, and volatility will start to become high in the grain trade, meaning upside potential instead of the nine days of heavy selling. It is noted that Pres. Trump and Chinese Pres. Xi has been in contact with talks and trade negotiations to stave off future tariff hikes. Mexico will continue to take US corn, wheat and soy meal on mutual rail logistics, and it’s anticipated that Mexico may have their issues settled sooner than other countries.

Live and feeder cattle futures were lower yesterday but ended well off early session lows. They are anticipated to open steady-mixed this morning as China imposed 10% tariffs on beef. New APHIS protocols have been slowing imports of feeder calves. The cost of imports due to the 25% tariffs placed upon Mexico and Canada will be higher in the short run, given the application of tariffs that will likely not be paid by cattle buyers, but forcing Mexican/Canadian cattle to be priced 25% lower if they will accept that.

The live market cattle trade is becoming concerning. If the trade war becomes lengthy, the consumer may start to feel the pinch and worries of an impending recession. Cash trade has already declined to $197, with the April board showing a five-dollar discount coming over the next 50 days with yesterday’s close.