Source: Ukragroconsult (Ukraine)
Wheat hit its highest in nearly three months as traders considered China’s cautious approach to U.S. tariffs and the market awaited details of possible talks between the leaders of the world’s two largest economies.
This comes as a new trade war is brewing between Washington and Beijing, expectations of which have rattled grain markets over the past week. But China’s retaliatory tariffs, announced Tuesday in response to initial U.S. moves, are seen as measured and suggest Beijing is trying to avoid the worst-case scenario of a major escalation, according to an analysis by Bloomberg Economics.
“China’s restrained response and generally friendly tone in state media and social media ahead of the U.S. deadline suggest an attempt to create a backdrop favorable to negotiations,” the report said. It also said there was a possibility that US tariffs might not end up being as high as the 60% that Trump threatened during the election campaign.
Grains, including wheat, rose in the previous session after Beijing imposed tariffs on U.S. energy and farm equipment but left grains on the sidelines just minutes after Trump’s 10 percent tax on Chinese goods took effect, cutting some initial losses. On Monday, Trump said he expected to hold talks with China “within 24 hours,” but he has since hinted that talks could be delayed.
Still, concerns remain that Sino-U.S. trade tensions could affect agricultural commodities such as soybeans. In China, soybean meal prices rose on Wednesday, the first day the market opened after the Lunar New Year holiday.
“Although agricultural products are not targeted by Beijing’s countermeasures, the market is still concerned about the uncertainty of future Sino-U.S. relations,” said Rosa Wang, an analyst at Shanghai JC Intelligence Co. Ltd. a China-based consultancy specializing in commodities.
Soybean meal prices also tracked gains in Chicago, while weather problems in South America affected quality in some regions and supported global prices for the oilseed, Wang added.
China is the world’s largest importer of soybeans and a big buyer of corn and wheat. U.S. tariffs could reduce demand for soybeans, jeopardizing exports worth $10 billion or more.
The most actively traded soybean meal prices on the Dalian Commodity Exchange rose 3.2%, the biggest intraday jump in three months. Soybean oil futures on the Dalian exchange rose 2.7%, while palm oil jumped 2.1%. Chinese corn rose 1.1 percent.
Meanwhile, Trump’s delay by a month of imposing 25 percent tariffs on Canada and Mexico also brought relief to grain markets. A weaker dollar is also making U.S. grains more competitive, CRM Agri said in a note.