This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at [email protected] or 843-540-4540.

In the days after the meeting between Trump and Xi, there were a lot of headlines made by U.S. announcements, but the Chinese side was curiously quiet. This week, they have released more details of the agreement from their perspective. There still has been no confirmation of the actual amounts of soybeans they agreed to buy to confirm the U.S. statements. This week, there have been details coming out about what China is going to do with the import tariffs on ag commodities. After reading a lot of updates and commentary, I think I may be more confused than before I started. Much has been contradictory, and so I am fairly convinced that no one actually knows right now.

It gets really messy because there were existing tariffs before Trump took office, then with all the back and forth, the U.S. and China kept adding tariffs and retaliating and calling them different things. So China says on Nov. 10 they will drop the retaliatory tariffs on many U.S. ag exports, but for at least soybeans, there will still be a 10% fentanyl tariff. All soybeans imported into China are subject to a 3% tariff and a 13% import value-added tax, but we do not really care about duties that are applied to both the U.S. and Brazil. The ones that are relevant to us are the ones that are only on U.S. beans, which increase the price and make U.S. beans less competitive.

Best we can tell, it is only the 10% tariff labeled the fentanyl tariff that will be charged on U.S. beans and not Brazilian ones. The market was expecting and has seen China be a buyer of U.S. beans since the agreement, but best we can tell, it is only Chinese state-owned companies. Since the price has rallied in the U.S. after the Trump-Xi meeting, U.S. beans are more expensive than Brazilian beans when you take the extra duties into account. So while we have seen purchases of U.S. beans by Chinese state entities, this week we have seen Chinese companies start buying Brazilian beans. The beans bought by the state companies are probably going into the government reserves, while the beans bought by the commercial companies will go to domestic demand.

Chinese buyers booked two cargoes of U.S. wheat this week, and the first cargo of sorghum hit the water headed to China. A trader quoted by Reuters said at least the wheat was a political move since U.S. prices are higher than other origins right now. There had been a lot of market chatter about the wheat and sorghum purchases, and it was good to get the confirmation. We are still operating in a bit of a fog without USDA flash export sales announced.

Markets have remained very volatile this week, with double-digit moves in both directions in soybeans as the market tries to interpret and process all the new information. Thursday, there were comments by the Chinese about rare earth exports that made the market nervous that the truce will not hold. News out of the Supreme Court was also cited as reasons for the weakness in the markets on Thursday. The court is considering whether Trump has exceeded executive power with his tariff policy.

The Supreme Court has a 6-3 conservative majority, but the questions the justices asked were very poignant and seemed skeptical of the administration policies. The market took those comments as increasing the probability of them ruling against Trump, which would throw a great deal of uncertainty on pretty much everything. Thursday saw major weakness in not only the ag commodities but in almost all other asset classes as well, including stocks and energies. It may be weeks or months before we get the ruling from the Supreme Court, so we might have a long time to wait, but the headline risk remains very real to the market.