One of the biggest commodity market news stories in recent history was the implementation of tariffs on all U.S. trade partners. While several countries now have tariffs on them, the one getting the most attention is China. The U.S. has placed several additional tariffs on China, taking total tariffs well above 100 percent. The actual rate remains unknown. China has already vowed to retaliate, and the ag sector may suffer.
The most concern is what this may mean for soybean demand. China has already scaled back its U.S. soybean demand to the bare minimum, but with Brazil producing a record soybean crop this year, it may allow China to further trim their need for U.S. soybeans. At the same time, this may also cut imports of used cooking oil from China, boosting domestic soybean consumption. China currently has no soybeans from the U.S. on the books for the 2025/26 marketing year.
The livestock complex was also impacted by tariff reactions. No tariffs will be placed on Mexico or Canada, which was supportive for pork demand. Other importers will see tariffs though, including Japan at 24 percent, South Korea at 25 percent, and China will see an additional 34 percent. Heavy liquidation developed in both feeder and live cattle contracts as those are the contracts with the greatest managed money length. Losses were compounded for cattle by thoughts that if the U.S. economy starts to suffer, beef consumption will decline first.
Basis values across the Interior market have started to firm, especially on corn. Producers across the U.S. have been active corn sellers this year and many report being 80 percent to 90 percent sold on old crop inventory. There is little urgency to market these final bushels, especially with the start of the spring fieldwork season that does tend to diminish selling interest, primarily in years with depressed market values. The most basis strength is in the Eastern Corn Belt, with basis tightening to levels that corn is starting to move out of the West to sell into these areas which is not a common practice.
We are now seeing improvement in processing margins for both ethanol grind and soybean crush. The average return for an ethanol plant is now between 10 and 15 cents a gallon, and on soybean crush it is holding near $1.50 per bushel. As a result, processors are more willing to push for deliveries. This will open windows for favorable cash sales over the next few weeks, but these will likely be short lived.
Even though harvest is advancing in South America, we are not seeing the export pressure that would be expected from crop sizes that are reported. The primary reason for this is building domestic demand in South American countries, mainly for ethanol manufacturing. The South American pipeline was more empty than normal this year which is also taking longer to fill. A bigger factor in slow South American marketing is currency exchange rates. The U.S. dollar has softened recently, and this tends to slow South American selling, or halt it altogether.
The USDA’s Foreign Ag Service has revised its Chinese soybean balance sheets. The FAS has Chinese soybean production this year at 19.8 million metric tons, a slight reduction from last year. The FAS sees Chinese soybean imports growing by 2 percent as a result, taking them to 106 mmt. Less wheat feeding will also bump soybean demand in the country, as will a rebound in hog production. Others point out how Chinese livestock production is becoming more efficient though, and supplement demand may actually decline.
One plus the United States has seen in Chinese trade is a sizable increase in soybean demand to start 2025. During the first two months of 2025, the United States shipped China 9.13 mmt of soybeans, an 84 percent increase from the start of 2024. Delays to the start of the Brazilian soybean harvest benefited demand, as was a push to make imports ahead of the tariffs the US had proposed on Chinese trade. This demand has already started to fade as Brazilian soybeans are now working into the global supply line.
China is reporting a rebound is taking place to the country’s pork demand. Pork consumption is currently running 33 percent higher than last year, and daily demand has reached its highest level in the past five years. Improved economic conditions and a more steady supply of hogs are behind the higher demand, and news of another stimulus package is likely to push it even higher.
China was an active buyer of U.S. beef for several months, but this has ground to a halt. All U.S. red meat import registrations with China expired but this had little impact on trade. The Phase 1 trade agreement with China included approval for all U.S. packing, processing, and storage facilities, but hundreds of these had since expired. Even so, China was not using the lack of approval against the U.S. The U.S. pushed China on these registrations, leading to an approval for pork and poultry facilities for the next five years. Beef facilities were omitted, however.
Chinese importers are now hesitant to book U.S. beef, especially with trade tensions between the two countries heating up. Chinese importers do not want to purchase U.S. beef to find it does not meet import guidelines and is rejected at port facilities. This follows a statement from the Chinese government that while tariffs may not impact commodity supplies, they will alter future trade patterns.
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