Life During Wartime: Ag Futures Start A Fresh Crop Year Under Tariffs

The summer of 2018 saw seismic changes hit the agricultural markets in the form of tariffs and counter-tariffs from the ongoing U.S.-China trade war. While September ushers in a new harvest for growers, it’s far from a clean slate.

As the price tag from the trade conflict grows, other forces are gathering to impact the harvest. Inclimate weather through much the U.S. has prompted an early harvest and lowered the quality of recent shipments of U.S. corn, soy and wheat that is already struggling to find a market. At the same time, South American and European growers are experiencing dry spells as demand from China grows. Despite all this, the strength of the USD has maintained a negative pressure on prices.

With September comes a new crop year, and each commodity has their own peculiar market environment to contend the next few month. Let’s take a look at where farmers and ag investors might find some wheat among the chaff.

Corn

In a negative trend since it peaked above 3.70 late in July, corn might have the toughest road to hoe if the tariffs continue. Ethanol is near an all-time low and, while European growers are struggling with a drought that’s created harvesting issues of its own, supply is still expected to be characteristically large. Three-month contracts are trading at August resistance at 3.67.

Soy

North America is expected to have another record soybean harvest for the current season. Despite having the biggest target on its back in the trade war, demand for soybeans has kept the market at least somewhat buoyant at around $8.40. After hitting support at $8.18 late August, the commodity managed to climb closer to $9 before testing a new bottom at $3.20. Scarcity in Brazil from Chinese demand and droughts throughout North and South America might help soybean prices make another run to the critical $9 level.

Wheat

After bottoming out just below $5, wheat has had an ascendant September on unseasonable heat in Europe and the U.K. hurting yields. Unlike Corn and soy, this production scarcity is causing prices to tick up, keeping the grain close to 2018 highs. Wheat could find its way within a dime of $6.00 in the near-term if it can find sustained support above old resistance at $5.35.