• China has increased tariffs on a list of US agricultural products. China’s tariffs on US soybeans will increase to 28% from 25% from 1 June 2019 onwards. Also, China’s tariffs on US pork products will rise to a range of 37% to 70% from 25%.

• Due to the trade war between China and the US, Brazil’s soybean shipments to China are expected to accelerate again. Bloomberg reported that Brazil shipped 5.7mil tonnes of soybeans two Fridays ago. This was a million tonnes higher than the previous week. The premium of Brazil’s soybeans over US soybeans has doubled to US$1.00/bushel, a sign that demand for Brazil’s soybeans is recovering.

• According to Bloomberg, a US industry group said it is unlikely that American farmers will regain their market share of China’s soybean market. An official with the US Soybean Export Council said that even if the trade dispute is resolved, the US would not see a return to record export levels. The council has targeted non-China countries such as Japan and Mexico to pick up the slack. However, these are not enough to replace China. In 2016, China imported a record level of 36mil tonnes of US soybeans. China’s imports of US soybeans dropped to 8.3mil tonnes in 2018.

• Bloomberg also reported that Indonesia has asked Brazil to reduce its import duty on palm oil. Currently, Brazil has an import duty of 14% on palm products. Malaysia exported about 5,890 tonnes of palm oil to Brazil in 2018.

• According to Reuters, planting delays for US corn resulting from heavy rains have caused a rally in prices but speculators were not ready to shed their bearish positions yet. In the week ended 14 May, hedge funds and other money managers increased their net short position in the corn futures to 282,918 contracts from 282,327 contracts a week earlier. According to the US Department of Agriculture (USDA), only 30% of US corn acres were planted as at 12 May compared with the five-year average of 67%.

• Reuters also reported that rural Iowans are pondering alternatives to President Trump as the China trade war drags on. Increasing frustrations over the prolonged dispute are prompting rural residents in Iowa to consider other candidates other than Trump in the 2020 election. The USDA is preparing a second round of aid up to US$20bil for farmers hurt by the trade war.

Source: AmInvest Research - 27 May 2019