US grain, livestock prices tumble on China trade war fears

US wheat prices fell by about 4%. (Reuters pic)

CHICAGO: US crop and livestock prices tumbled on Tuesday, with soybean futures hitting lows not seen in nearly a decade, as US President Donald Trump threatened more tariffs on US$200 billion (RM800 billion) of Chinese goods, stoking fears the trade battle between the two economic giants would have a wider impact on the global economy.

Chicago Board of Trade soybeans fell as much as 6% and wheat slumped more than 4%. Corn, cotton, and ethanol futures notched life-of-contract lows.

Chicago Mercantile Exchange lean hog contacts shed more than 2% of their value early on Tuesday. Live cattle futures at one point dropped 1%, led by Wall Street’s retreat and a higher dollar that makes US goods less attractive to foreign buyers.

Trump’s threat followed his administration’s announcement of tariffs on US$50 billion (RM200 billion) of Chinese goods last week, which triggered retaliatory tariffs by Beijing on a slate of US products, including soybeans and corn.

The US exported US$12.4 billion (RM49.7 billion) worth of soybeans to China last year, the single most valuable US agricultural export product to its Asian rival.

Trade tensions between the world’s two largest economies have unnerved farmers and slammed agricultural markets on worries that China, the largest importer of US soybeans, pork, and cotton, would slow or halt purchases of those and other US farm goods.

US crop farmers have lost an estimated US$247 (RM989) per hectare in revenue with the swift escalation in the trade spat over the past two weeks, the most rapid erosion of US farm profit since at least 1979, according to Dan Basse, president of Chicago-based consultancy AgResource Co.

Net farm income was already projected to fall 6.7% to US$59.5 billion (RM238.2 billion) in 2018, a 12-year low, according to the U.S. Agriculture Department.

“When you get in a fight with your biggest buyer of agriculture, and the world’s largest soybean buyer, even if (they) were to buy 20% less, it’s a big deal,” Basse said.

Concerns about tariffs are already disrupting global trade.

China, which imports about two-thirds of all soybeans traded globally, has not bought significant amounts of US soybeans in three weeks. Traders fear that China will begin canceling the more than 3 million tonnes of US soybeans that it has purchased but have yet to ship, valued at more than US$1 billion (RM4 billion).

The country has also not bought significant US ethanol volumes for about six months, despite increased targets for its use there, amid the threat of tariffs on the corn-based biofuel. The US ethanol industry has become more dependent on exports due to big domestic stockpiles.

“(China) has to be buying it from somewhere,” said a US ethanol trader who asked not to be named because he was not authorised to speak to the media. “It isn’t here.”

The trade fight with China comes amid elevated trade tensions with several other top US farm product importers, including Mexico and Canada, over Washington’s tariffs on imported steel and aluminium.

The steep grain slump rippled across agricultural commodities markets, with prices for hogs and cattle, which normally benefit from cheap feed prices, also dropping.

Stock prices for US grain merchants and meat processors were mixed.

Archer Daniels Midland Co shares slipped 0.6% to US$45.90 (RM183.75), and CHS Inc shares lost 0.8% to US$29.73 (RM119.02). Bunge Ltd’s stock was up 1% at US$71.81 (RM287.47).