US grain prices fall as trade war sparks fears of glut

US grain prices have fallen sharply in recent weeks as retaliatory tariffs on the country’s agricultural exports fuel fears that a trade war will create a supply glut on global markets.

Corn, wheat and soyabean prices in Chicago have dropped since mid-February, coming under further pressure this week after China and Canada said they would impose a range of tariffs on US foodstuffs.

Traders have been forced to rapidly rethink their outlooks as the major trading partners threaten tariffs on some of their main exports.

On Thursday, US President Donald Trump said he would postpone tariffs on most goods from Mexico for a month.

Howard Lutnick, US commerce secretary, said the reprieve would probably also be extended to Canada. However, Canadian Prime Minister Justin Trudeau warned his country would be in a trade war with the US for the “foreseeable future”.

Futures rebounded on Thursday although still remain far below their mid-February highs.

Wheat, which has slumped more than 17 per cent in three weeks, rebounded 2.1 per cent to $5.60 per bushel following Trump’s decision.

Contracts tracking corn, which have fallen 9 per cent in the last month, rose 2.8 per cent to $4.52 a bushel.

Soyabeans, which had fallen 8 per cent since mid-February, added 1.5 per cent to 1,017 cents a bushel.

China announced on Tuesday that it would impose a 10 per cent tariff on imports of soyabeans, sorghum, pork and beef from the US, alongside a 15 per cent levy on chicken, wheat, corn and cotton.

As the world’s biggest pork producer, China accounts for more than 40 per cent of US soyabean sales.

Both soyabeans and corn are primarily used for livestock feed. Canada also set 25 per cent levies on US-imported grains, meat and dairy products on expectations of an influx of US supply.

Mexico, the biggest market for US corn, said it planned to announce its own countermeasures this weekend.

“If Mexico stops buying US corn, there will be a surplus, creating more availability for other countries,” said Carlos Mera, head of agricultural commodities at Rabobank, “That will push down prices.”

The retaliatory tariffs come in response to Trump saying he would impose 25 per cent duties on imports from Canada and Mexico and raise tariffs on China to 20 per cent, as the US agriculture trade deficit heads towards a record $49bn this year.

Mexico is a big buyer of US wheat, which it uses mainly for milling to make flour.

Prices have also retreated on speculation over a peace deal between Ukraine and Russia, brokered by Trump.

Ukraine is one of the world’s biggest grain producers.

The trade war has prompted a backlash from US farmers, whose income has plummeted over the past three years as prices tumble and the cost of inputs, such as fertiliser and seeds, has gone up.

They have also been hit by Trump’s freeze on funding from the Inflation Reduction Act, which supported sustainable agriculture projects.

“Farmers are facing a troubling economic landscape due to rising input costs and declining corn prices,” said Kenneth Hartman Jr, president of the National Corn Growers Association.

“We ask President Trump to quickly negotiate agreements with Mexico, Canada and China that will benefit American farmers.

” The US agriculture department last week reported an increase in the projected corn planting area to 94mn acres, exceeding market expectations.

The larger than expected acreage prompted speculative funds, which had built near-record long positions in corn, to unwind their bets.

Adverse weather in Brazil and Argentina, coupled with Mexico accelerating corn imports ahead of tariffs, had previously drawn hedge funds into the market.

Andrey Sizov, managing director of grain consultancy SovEcon, expressed scepticism about a surge in wheat supply, but said reduced freight costs for Ukrainian grain could lower prices.

“The insurance premium currently factored into shipping costs is substantial,” he said.

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