Steel and aluminum tariff implementation sparks backlash
The Trump Administration announced that the exception would be lifted for previously-announced tariffs on steel and aluminum imports from Mexico, Canada and the European Union. This move hits hard for some of the U.S.'s top trade partners. Canada...
The Trump Administration announced that the exception would be lifted for previously-announced tariffs on steel and aluminum imports from Mexico, Canada and the European Union. This move hits hard for some of the U.S.'s top trade partners. Canada was the No. 1 importer of U.S. agricultural and related products in 2017, bringing in over $24 billion. Mexico was No. 3, behind China, buying $19 billion of agricultural goods. While the European Union is a smaller buyer of U.S. agricultural goods, many countries are strategic allies that will be impacted by this move.
Retaliation and reaction from these countries were swift. Mexico announced plans to put equal tariffs on agricultural goods like grapes, cheese, pork products and apples. The Mexican trade ministry stated, "Mexico profoundly regrets and condemns the decision by the United States to impose these tariffs on imports of steel and aluminum from Mexico. Mexico reiterates its openness to constructive dialogue with the United States, its support for the international commerce system and its rejection of unilateral protectionist measures."
Canada not only put tariffs in place for items like whiskey and orange juice, but is also seeking an explanation for the U.S.'s $30 billion farm spending war chest (addressing the recent passage of the U.S. Bipartisan Budget Act of 2018 that allows usage of Commodity Credit Corporation funds to aid farmers). A submission to the World Trade Organization's agricultural committee will examine farm support programs that other countries find suspicious or unfair.
Finally, France's President Emanuel Macron had strong words relating to the move by President Donald Trump: "This decision is not only unlawful but it is a mistake in many respects. Economic nationalism leads to war." Much like the previous trade dispute with China, the final impact of the tariffs and the following responses is not yet known. But like the situation with China, retaliation is focused on states that supported Trump, this time ahead of the 2018 election cycle.
Kansas City futures hit a new high before falling back off this week. The Minneapolis contract also broke through resistance, but an upward rally could not be sustained. Improved weather allowed the markets to fall. Drought conditions remain in large parts of the U.S. Plains, but the total area under duress got a bit smaller in the weekly drought monitor. Forecasts continue to show plenty of heat in the days ahead, but the Northern Plains and Canadian prairies should get adequate moisture (and the Corn Belt is not expecting much stress). The U.S. Department of Agriculture's weekly report on crop conditions showed the winter crop improving to 38 percent good to excellent from 36 percent a week ago. Spring wheat planting is also just ahead of the normal pace, and should be wrapping up soon (already at 91 percent completion compared to 89 percent for the five-year average).
The durum market remains depressed. Any excitement from the lack of precipitation in the Plains has faded, and strong supplies and good weather continue to dominate the market's sentiment towards durum.
Canola futures found some strength, as it appears the U.S. will continue with tariffs on Chinese goods. This could send business to other countries for edible oils. Even still, gains were limited by an improved weather forecast. Plenty of precipitation is expected in the prairies in the next week and a half. This will help restore moisture for the recently planted crops.
Peas and lentils
Pulse exports are up from Canada. April lentil movement was reportedly 3,000 metric tons ahead of a year ago, with increased trade with the U.S. and Bangladesh.
Agriculture Canada is expecting a big jump in mustard seed output in 2018. Their report showed output is expected to hit 170,000 metric tons compared to 122,000 metric tons last year. Exports and domestic usage are not expected to vary much from a year ago.
The U.S. barley crop is basically planted at 93 percent completed. Crop conditions are very good for this time of the year, with 69 percent of the crop rated good to excellent.