Ag Commodities, WTI Crude On The Bear
Shain Vernier • 2 min read
The fresh round of U.S. tariffs on Mexico has thrown the commodity markets into chaos. Agricultural commodities, as well as crude oil, have fallen out of bed as traders prepare for retaliatory tariffs on American exports to Mexico. At this point, ag products and oil are trending south in a big way.
Ag Commodities Dive
The entirety of the ag markets are in the red, from corn to cattle. Pledges by the Trump administration to raise tariffs by 25% on Mexico if illegal immigration is not curbed have rattled sentiment to the core. Corn, soybeans, wheat, lean hogs, and feeder cattle are all deep in negative territory as traders brace themselves for an unprecedented North American trade standoff.
Crude oil hasn’t been spared from the fallout. July WTI futures have crashed below $55.00 for the first time since February. To say that this price action is “abnormal” is the understatement of the year ― “alarming” is more appropriate.
As far as the daily technicals go, there isn’t a whole lot to play off of in July WTI crude. The biggest level in this market is $55.00; other than that, the technical roadmap is wide open.
May’s price action in WTI crude is reminiscent of last fall’s plunge in Bitcoin. Most active traders and analysts, myself included, expected Bitcoin bulls to put up a fight at $5000. This idea proved to be categorically false, and prices continued to plunge to the $3000 area.
The near-term outlook for WTI crude is much the same. Although it is oil buying season, investors are headed for the door. The odds of a global economic slowdown increase with each tariff levied and that is bad news for the energy sector. If $55.00 gives way as support in July WTI, then $50.00 will be upon us very quickly.
Today’s weakness in ag commodities is adding pressure to an already embattled sector. Extreme flooding has decimated grain crops in the Midwest, with many producers taking long positions in the futures markets to offset losses. If a U.S./Mexico tariff standoff develops, Midwestern farmers are in for tough times ahead.