FxWirePro: Corn price up 12 percent on Trump’s put; further rise likely

Corn showing signs of recovery,

• Earlier this month, the price of Corn in the United States declined to the worst level since the September 2018 as the Sino-American trade negotiations failed to yield results and both sides once again resorting to tariff war. Earlier this month, President Trump hiked the tariffs on $200 billion worth of Chinese goods from 10 percent to 25 percent, and China responded by imposing tariffs on $60 billion worth U.S. goods.
• While China is not the prime buyer of U.S. Corn, the jolt was felt across the commodity market. The U.S. is the biggest exporter of Corn. In 2018, the U.S. exported $12.9 billion worth of Corns or 38 percent of global corn exports.

As a result of the trade war between the U.S. and China, the Corn price declined 342 cents per bushel. However, President Trump successfully placed a floor under it. The price is currently trading at 383 cents per bushel, up almost 12 percent.

Here is the Trump put,

• “Talks with China continue in a very congenial manner - there is absolutely no need to rush - as Tariffs are NOW being paid to the United States by China of 25% on 250 Billion Dollars worth of goods & products. These massive payments go directly to the Treasury of the U.S.... ....The process has begun to place additional Tariffs at 25% on the remaining 325 Billion Dollars. The U.S. only sells China approximately 100 Billion Dollars of goods & products, a very big imbalance. With the over 100 Billion Dollars in Tariffs that we take in, we will buy..... ....agricultural products from our Great Farmers, in larger amounts than China ever did, and ship it to poor & starving countries in the form of humanitarian assistance. In the meantime we will continue to negotiate with China in the hopes that they do not again try to redo deal!”
• “We are right where we want to be with China. Remember, they broke the deal with us & tried to renegotiate. We will be taking in Tens of Billions of Dollars in Tariffs from China. Buyers of product can make it themselves in the USA (ideal), or buy it from non-Tariffed countries... ....We will then spend (match or better) the money that China may no longer be spending with our Great Patriot Farmers (Agriculture), which is a small percentage of total Tariffs received, and distribute the food to starving people in nations around the world! GREAT! #MAGA”

With a put like that, we expect Corn and other grain prices to rise.

Trade idea:

Our calculations at FxWirePro suggests that corn price is set to rise further towards 425 cents per bushel. 390 cents area is likely to act as key resistance.