Tidbits, Tariffs, Cotton, South America 2/2/25

2 days ago4 min read

Highlights

Canada is taking similar measures in response to U.S. President Donald Trump's 25% tariffs on its goods, Canadian Prime Minister Justin Trudeau said. The 25% tariffs are imposed on goods from the U.S. worth 155 billion Canadian dollars ($106.5 billion). The measures will come into effect on 4 February on goods worth 30 billion Canadian dollars, three weeks later the rest will follow.

Trudeau added that Canada could also resort to non-tariff measures, such as those related to energy and critical materials. He also urged Canadians to buy local goods and take vacation in their own country rather than in the U.S.

China's Ministry of Commerce said such unilateral measures violate World Trade Organization rules. In response to the U.S. misconduct, China will file a lawsuit at the WTO.

Mexican President Claudia Sheinbaum said she has ordered the implementation of "tariff and non-tariff measures to protect Mexico's interests."

She rejected the U.S. administration's claims about the Mexican government's ties to criminal organizations and suggested that the U.S. should start fighting street drugs and associated money laundering at home.

About 80% of Canada’s and Mexico’s exports go to the United States. For Canada, U.S. tariffs on the canola oil would be a tough pill for Canadian farmers since there is no apparent alternative market for the surplus. China already imposed tariffs on Canadian canola to shut the Chinese market, and Europe is capped at 2 million mts per year due to its GMO policy.

This past year, Canada has been the largest importer of U.S. ethanol. Will Canada put a tariff on U.S. ethanol? Probably.

Mexico bought 24.8 million mts of U.S. corn the past marketing year. It also imported 6.5 million mts of soybeans and 2 million mts of soybean meal. Note that Mexico and any other corn importer has no choice but to import corn from the U.S. until June if they have to buy corn.

Tidbits

Commodity Futures Trading Commission (CFTC) data showed Friday afternoon the speculative trading funds added 5,135 contracts to their net short cotton position (sold futures contracts which need to be bought back or the commodity must be delivered before the futures contracts expire). That took the big spec funds to a record large net short position of 53,574 contracts. That means those sellers will turn buyers soon, but when and how much lower before they turn buyers?

Export Sales data this week showed the marketing year cotton export sales at 8.697 million RN (running bales = running bale is a bale of cotton that has just come out of the gin, usually weighs around 500 pounds), which is 77% of the USDA export forecast (analyst Austin Schroeder reports 85% of the USDA export forecast); the average export sales pace is 86% for this stage of the marketing year. Cotton competes for acres with corn and soybeans.

As to corn & wheat, Reuters’s Ag News Reporter Karen Braun noted:

"Funds have never come close to being this bearish toward wheat while maintaining/building such bullish corn bets."

What she is saying is the large speculative trading fund managers have never held such a large number of short wheat contracts (sold futures contracts which must be bought or deliver the wheat at some later date) while being long such a large number of corn futures contracts (purchased futures contracts that need to be sold or accept delivery of corn at a later date).

More wheat is being included in livestock rations because wheat is cheap compared to corn and soybean meal. Note the maximum wheat that will be in a feed ration is 20% because of wheat gluten content. The animals chew the gluten all day instead of consuming more feed.

Eduardo Vanin of Brazil’s grain exporting and consulting firm Agro Invest reports:

"Soybean export program remains very slow. The problem now is not the slow harvest, but the lack of trucks. The Mato Grosso logistics are plugged."

Fire at Rumo rail terminal in Rondonopolis, Mato Grosso was not contained to just one conveyor bearing. The entire length of the conveyor from the hot bearing to the dump end of the conveyor was ablaze. None-the-less, the conveyor is expected to be back in operation by Wednesday or Thursday.

Agro Invest Friday crop comments for southern areas of South America:

"In Rio Grande do Sul, the most southern state of Brazil, east of Argentina, corn planting is 98% complete, while harvesting has progressed to 38%, marking a 10% increase from the previous week, according to Emater. Most of the state's crops are in the maturation stage (24%), while others are in grain filling (19%), vegetative development (10%), and flowering (9%). Drought-related losses in January mainly affected the grain-filling phase, though the impact is not uniform across all areas.

In Argentina, corn planting has also been technically completed, according to the Buenos Aires Grain Exchange. Operations are now focused on the northern agricultural region, with completion expected in the first week of February. However, the ongoing drought continues to deteriorate soil moisture conditions. Currently, 57% of the country’s cornfields have optimal/adequate moisture levels, a 2% drop from last week, and significantly less than 71% during the same period a year ago."