Argentina's export tariff reduction and China's economic slowdown will increase pressure on soybean, corn and wheat prices

On Friday, global oil and agricultural prices fell amid news about China's economy, Argentina's reduction in export duties, and the start of new tariff wars by the United States.

March futures fell:

• by 1.9% to $199.9/t - for soft winter SRW wheat in Chicago,
• by 2% to $205.6/t - for hard winter HRW wheat in Kansas City,
• by 1.6% to $218.7/t - for durum spring HRS wheat in Minneapolis,
• by 0.7% to $191.9/t – for corn in Chicago,
• by 0.95 to $387.9/t – for soybeans in Chicago.

On Paris' Euronext, March futures also fell:

• for wheat – by 1.9% to €226/t or $236.4/t,
• for corn – by 1% to €213.75/t or $223.6/t.

To support the export industry, which is critical to the economy, the Argentine government announced a reduction in the export duty on soybeans from 33% to 26%, on soybean meal and oil from 31% to 24.5%, and on corn, wheat, barley, and sorghum from 12% to 9.5% for the period from January 27 to June 30.

Argentina is the world's largest exporter of soybean oil and meal and the third-largest exporter of corn, as well as a major wheat producer. Amid the heat and lack of rainfall, the Buenos Aires Grain Exchange has lowered its 2024/25 soybean and corn harvest forecasts to 49.6 million and 49 million tonnes respectively, already pushing up prices.

The US government on Saturday began sending military planes to Colombia and Mexico to take migrants back, but the countries refused to accept the planes. Trump then imposed a 25% tariff on Colombian goods and warned that he would increase it to 50% if they did not cooperate. In response, Colombia imposed tariffs on US goods but sent its own plane to pick up the migrants. The US has apparently already started trade wars to achieve its goals.

China's manufacturing PMI fell to 49.1 (though it was expected to remain stable at 50.1), and the non-manufacturing PMI fell to 50.2 from 52.2, indicating a contraction in manufacturing despite government stimulus measures. Trump's tariffs on Chinese goods will further reduce demand and slow the economy.

New CIA Director John Ratcliffe has said that the COVID-19 pandemic was caused by a virus leak from a laboratory in Wuhan. This will be an additional lever of pressure on China by the new US Administration and, amid demands for trillions in global damages, will collapse the Chinese economy.