The U.S. soybean crop continues to look exceptional, and there are few weather problems expected that could derail a near-record sized crop. However, dark clouds are forming over the market as trade disputes deepen between the U.S. and our two biggest soybean buyers, Mexico and China.
This week, President Trump announced escalated tariffs against $50 billion in Chinese products, which will likely result in retaliation from China against U.S. soybeans.
Meanwhile, Mexico raised the prospect of tariffs against U.S. farm products like corn and soybeans. This appears to be an intentional political maneuver by Mexico, as their officials have stated that they are directing tariffs against Midwestern farm states, which overwhelmingly supported President Trump in 2016.
While the ultimate outcome of these trade negotiations is unknown, this uncertainty about future demand is wreaking havoc in the grain markets, with July soybeans sinking to a one year low at $9.03 per bushel on Friday morning, while corn was dragged to a five-month low near $3.55 per bushel.