While Wall Street Watches "The Nvidia", Tariffs Hammer Commodities From Corn to Copper

TL;DR

• Agriculture: US grain markets saw sharp volatility following new tariffs, spreading uncertainty to other regions like EU, Ukraine and China. 

• Energy: WTI crude plunged over 7% to $61.99/bl after China’s retaliatory tariffs and an OPEC+ decision to boost output by 411,000 b/d. Goldman Sachs slashed oil demand growth forecasts from 900,000 to 600,000 b/d.

• Metals: The metals market suffered a heavy blow with aluminum dropped 3%, while copper and silver plunged over 8% in a single day. Even gold, the recent safe-haven, slipped 3%, though it still closed well above $3,000/oz.

• Economic Outlook: Fed Chair Powell warned that the economic fallout from tariffs could be "significantly larger" than expected. The IMF echoed the alarm, citing tariffs as a major global risk amid already fragile growth.

---

The grain and oilseed markets found themselves trapped. The full consequences of US tariffs - imposed by the world's leading exporter of wheat, corn, and soybeans - remain uncertain, pending retaliatory moves from international trade partners.

As the CBOT opened on 3 April, wheat, corn, and soybean futures initially declined, reminiscent of the uneasy mood that gripped markets after the historic Smoot-Hawley Tariff Act of 1930. However, corn and wheat futures notably recovered later in the trading day, signaling cautious optimism among traders.

But on April 4th, corn was left the lone standout, posting a modest gain while soybeans crashed 3.4% and wheat eased 1.3% lower. Live cattle also slipped 2.6%, adding to the sector's gloom. As always, the soft commodities stole the show for volatility: cocoa and coffee plunged more than 8% and 6% respectively. 

Canada and Mexico are somewhat shielded under the USMCA and the latter has absorbed 19m of the 54m tons of US corn exported so far this year, with USDA projecting 62m tons total. Ukrainian corn gained relative pricing power amid disrupted US-China flows, though Chinese buyers remain reluctant. Soybean exports to China have slowed significantly, with only 600,000 tons of US corn sold but not shipped by late March - down from 1.6m tons a month earlier.

In Europe, Euronext wheat, corn, and rapeseed futures also faced downward pressure. However, the weakening US dollar provided some relief, keeping bids and offers for EU wheat relatively stable in dollar terms.

Shifting to the energy markets, WTI crude oil prices tumbled by more than 7%, dropping $4.96/bl to $61.99/bl, marking the lowest level since April 2021. Analysts described the sudden OPEC+ decision to increase production by 411,000 b/d as an addition to the overall bearish outlook, with some already mentioning $30/bl levels on the horizon. Goldman Sachs lowered its oil demand growth forecast sharply, from 900,000 b/d to 600,000 b/d, underscoring heightened recession risks.

Meanwhile, metals were not spared from the turbulence. Aluminum fell by 3%, while copper and silver posted staggering losses of over 8% in a single day. Even gold, recently the standout performer amid market uncertainty, dropped 3% - though it managed to close above the symbolic $3,000/oz threshold, clinging to its reputation as a haven, albeit slightly tarnished.

And yet, while investors looking at their Mag 7 profits deterioration, the more consequential story may be unfolding in the commodity pits. With crude collapsing, grains stumbling, and metals in freefall, it’s becoming increasingly clear: watching corn may offer more insight into global stability than watching Nvidia.

Fed Chairman Jerome Powell, speaking at a conference, diplomatically warned that tariffs and their consequences would be "significantly larger" than anticipated, adding dryly, "It is too soon to say what will be the appropriate path for monetary policy." The IMF echoed Powell's concerns, characterizing the tariffs as a "significant risk" at a delicate moment of global economic sluggishness.

As global markets navigate these troubled waters, the echoes of past economic upheavals - from tariff wars of the early 20th century to the financial storms of recent decades - serve as timely reminders of the thin line between calculated risk and costly miscalculation.

The information provided in this market report is for general informational purposes and should not be considered financial advice. It is not intended to offer any financial recommendations or endorsements. Any decisions made based on the content are the sole responsibility of the reader.