CHICAGO (Reuters) – US soybean futures beat declines in most other markets on Friday as the trade war with China increased and Beijing said it would impose tariffs on US imports of soybeans, the product of most valuable agricultural export of the United States for its Asian rival.
U.S. President Donald Trump previously announced tariffs on $ 50 billion of Chinese imports, as he demanded Beijing's best terms of trade to close an annual deficit of $ 335 billion.
The dispute is beginning to interrupt the flow of goods and services among the world's largest economies. China also said it would tax the United States oil and gas imports.
Soybean futures fell 2.3 percent and reached their lowest price in a year, as farmers prepared to cut soybean shipments by 12 billion dollars that they send to China annually. Corn and wheat futures each fell less than 0.5 percent.
The steel industry, also susceptible to commercial dispute, lost ground, as the S & P 1500 Steel .SPCCOMSTEEL fell 2.4 percent. By contrast, the S & P 500 fell for the last time by 0.1 percent and the US dollar index. UU It was flat.
Soybeans were more affected because China is by far the largest buyer, said Chad Hart, an agricultural economist at Iowa State University.
"We can not find other markets in the world large enough to offset the loss of China, "he said.
China said tariffs on US soybeans would go into effect on July 6, a blow for US farmers already struggling due to the oversupply of grains in the world. Agricultural incomes are half of what they were in 2013, after massive harvests that have depressed crop prices.
Soybean futures responded quickly as traders took into account the impact of lower demand for US soy from the world's largest buyer, China. The import duties will increase the prices of US soy in transit to China that arrives after July 6, which could lead to the cancellation of purchases by buyers.
This happened when Chinese importers canceled shipments of US sorghum in April for new tariffs.
As of June 7, soybean sales not sent to the US UU They added almost 3 million tons, with approximately half scheduled for shipment before the fall harvest and the other half after harvest, according to the US Department of Agriculture. UU There are likely to be more sales to China within the approximately 7 million tons of soybeans yet to be reported to the USDA with undisclosed final destinations.
It would be worse if soy tariffs were in effect when US farmers harvest their next crop in the fall, when US grain shipments accelerate. UU To China, agricultural economists said.
"The soy market and this commercial drama with China really makes me nervous," said Kayla Burkhart, manager of the grain division of CHS SunPrairie, an agricultural cooperative in North Dakota.
November soybean contract prices, which represent the harvest that will be harvested in the fall, have decreased by more than $ 1 per bushel at the Chicago Board of Trade since the beginning of the month.
July's most negotiated contract prices reached a low of $ 9.03 a bushel on Friday, the lowest since June 23 last year. The contract ended at 21-3 / 4 cents at $ 9.05-1 / 2. A fall below $ 9.00 per bushel would take the contract to a minimum of more than 2.5 years.
For months, American commodity traders, equipment manufacturers, and farmers in the Midwest expected that this day would never come. And even when the White House announced that some tariffs would begin next month, many in the agricultural sector were still hoping to avoid a trade war.
"We expect a timely resolution that will be beneficial to the global economy of agriculture and manufacturing," said US tractor manufacturer Deere & Co.
Deere shares fell 1 percent to $ 148.75.
BILLIONS AT STAKE
China has the largest livestock sector in the world and is expected to buy 103 million tons of soybean imports in the 2018/2019 marketing year, almost two-thirds of global soybean exports.
China's tariffs could contribute to a 30 percent drop in farm income for Ohio's corn and soybean growers this year, said Ben Brown, an agricultural program manager at Ohio State University.
If rates are kept in place, net farm income in Ohio could fall as much as 63 percent in 2019, he said.
In search of protection against such a decline, farmer Ron Heck is building a new grain container on his land in Perry, Iowa. The 110,000-bushel container will allow him to wait to sell his next crops if commercial disputes hurt prices From the market.
"This could be ugly for a period of months," Heck said.
Market volatility could be a benefit, however, for global grain traders such as Archer Daniels Midland Co, Bunge Ltd and Cargill Inc. [CARG.UL] said Seth Goldstein, equity analyst at Morningstar in Chicago.
Cargill warned in a statement on Friday that the trade dispute between the United States and China "will have serious consequences for economic growth and job creation."
The US agricultural sector also faces the threat of tariffs on corn exports to the top buyer Mexico, as Trump fights trade wars on several fronts.
Additional reports by Rajesh Kumar Singh, P.J. Huffstutter, Karl Plume, Julie Ingwersen and Theopolis Waters in Chicago; Edition of Simon Webb and Tom Brown