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US-China Trade Truce Sparks Rise In Grain, Soy Prices

Published on May 21 2018 1:29 PM in Supply Chain tagged: China / USA / grain / Soy / chicago / Trade Agreements

US-China Trade Truce Sparks Rise In Grain, Soy Prices

Grain and oilseed prices were higher on Monday after Washington and Beijing agreed to drop tariff threats, easing fears about demand for U.S. shipments to China.

Dealers said gains were tempered by a strong dollar with the U.S currency climbing to a five-month high.

The U.S. trade war with China is "on hold" after the world's largest economies agreed to drop their tariff threats while they work on a wider trade agreement, U.S. Treasury Secretary Steven Mnuchin said on Sunday.

"Such a truce is likely to alleviate concerns over the U.S. grains exports to China in the short term," ING said in a market update, adding that the news had contributed to a rise in soybean prices on Monday.

The most-active Chicago Board of Trade soybean contract was up 1.7 percent at $10.15 a bushel at 0951 GMT.

In April, China proposed a 25 percent tariff on U.S. soybeans as part of its response to Washington's plans to impose tariffs on a range of Chinese products.

But the upside in U.S. soybean prices is limited.

Agricultural Support

"Easing of trade war tensions between the U.S. and China are supporting agricultural markets," said Phin Ziebell, agribusiness economist at National Australia Bank. "However, Brazilian soybeans are getting competitive and they have a record crop to sell, so the upside for U.S. beans is limited."

Orders for nearly 1 million tonnes of U.S. soybean exports were cancelled last week, according to U.S. government data released on Friday, as cheap supplies from Brazil made U.S. cargoes less attractive to buyers.

CBOT corn climbed 0.8 percent to $4.05-3/4 a bushel and CBOT wheat rose 0.5 percent to $5.21-1/4 a bushel. Earlier in the session, both markets climbed to their highest since May 4.

Weather Concerns

Wheat also drew support as dry conditions are set to linger across the U.S. Plains, threatening further damage to an already-parched crop.

"The weather worries are gathering for wheat," Commonwealth Bank of Australia analyst Tobin Gorey said. "U.S. problems are well known but the market now has concerns about Australia, the EU and parts of the Black Sea."

December wheat futures on Paris-based Euronext rose 0.4 percent at 180 euros a tonne.

News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.

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