CBOT corn futures plunge on China's announcement of tariff on US soybeans

05.04.2018

The front-month CBOT May corn futures contract dropped 7.50 cents to $3.8100/bu Wednesday, due to China's announcement of proposed 25% tariff on US soybeans, sources said.

Although there was no announcement of tariffs on US corn seed, just on the custom code for other-corn, corn dropped as market participant were worried about farmers switching acreage from soybean to corn, sources said. On Thursday, CBOT May corn futures spiked 14.25 cents to $3.8775/bushel after the release of a US Department of Agriculture's prospective planting report that showed estimated corn acreage for the 2018-19 marketing year below market expectations.

That was the first year the estimated soybean acreage had surpassed corn, as farmers have been switching due to the greater profits, sources said. But now farming corn could be more profitable than soybean.

S&P Global Platts assessed US corn, CIF New Orleans outright -- the cash price -- for April delivery in barges at $4.34/bu, a decrease of just 1 cent/bu. The front-month basis was 6.5 cents higher at 53 cents/bu.

Farmers had already sold a substantial quantity of corn in the past rally, so China's tariff proposal news did not immediately impact them, a source said.

"Farmers won't panic immediately, funds will dump faster than they will," a market participant added. "They sold well on the rally, in any case, no hurry now."

Corn is the main competitor for DDGS and also the main source of US-produced ethanol.


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