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There’s an interesting paradox occurring in today’s commodity and financial markets. Maybe you’ve noticed it; market watchers certainly have. Here’s what they’ve seen:

Every time President Donald J. Trump takes to Twitter to threaten a nation with import tariffs—most recently, Mexico—the U.S. stock market shoots higher.

Paradoxically, however, every time U.S. Secretary of Agriculture Sonny Perdue attempts to explain any new Trump tariff, commodity markets head south.

For example, the Dow Jones Industrial Average closed at 24,815 on May 31, the day the President said he’d impose 5 percent tariffs on U.S. imports of Mexican goods on June 10 if Mexico didn’t stem the flood of immigrants into the U.S.

A week later, after the President declared (a still disputed) victory, the Dow stood at 25,984, up a fat 1,169 points in only five trading days.

Secretary Sonny, however, doesn’t have his boss’s market mojo. Between the May 31 tariff announcement and the June 7 “deal,” December corn futures fell 8 cents per bushel while November soybean futures tumbled 32 cents per bushel.

What explains the Dow rising on presidential trade threats and commodity futures falling on the exact same news?

One explanation is Wall Street securities traders no longer believe Trump’s trade bombast while LaSalle Street’s commodity traders view any Trump trade news as bad news.

The trend, not surprisingly, flipped June 11 when the U.S. Department of Agriculture’s (USDA) World Agriculture Supply and Demand Estimate predicted the mudded-in 2019 U.S. corn crop won’t meet anticipated demand unless higher prices cut use and 2018 carryover stocks are tapped.

That hard news pushed December corn futures up 12 cents to cover the previous week’s “soft news” losses.

Interesting, too, is that before the bullish USDA report launched prices higher midday June 11, December corn futures were seven cents lower because of Perdue’s night-before statement that declared USDA lacked legal authority to spend any of the $16 billion in announced tariff bailout money on unplanted acres.

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Curiously, Perdue did note that USDA might be able to make tariff bailout payments to farmers if they planted certain types of crops on the “prevented plant” acres. One of those crops is soybeans.

As arcane as that sounds, Perdue’s announcement holds the key to not just what farmers might receive in 2019 tariff bailouts—what USDA calls Market Facilitation Payments (MFP)—but also the 2019/20 soybean market. Here’s why:

Perdue’s current reading of USDA’s authority says farmers need to plant “approved” crops on previously too-wet corn acres to get any MFP cash. As such, many of those former corn acres—millions, in fact—will now grow soybeans, a crop already in heavy oversupply.

Indeed, the June 11 USDA report forecasts farmers will add to the soy oversupply because of the corn/soy switch caused by weather and USDA’s current belief it can’t use MFP money to, essentially, pay farmers not to plant a crop we do not need.

Some veteran USDA watchers, however, believe Perdue’s reading of the MFP is dead wrong; they claim USDA can pay farmers to not grow soybeans on any or all “prevented plant” acres.

The proof, they say, is that since USDA created MFP out of thin air to dole out $9 billion in tariff bailout money in 2018, it certainly can amend those same rules to encourage farmers not to grow an unneeded crop in 2019.

Others agree but suggest USDA doesn’t need the MFP money because it already has a pot of money, $3 billion from the just-passed hurricane-flood relief bill, to “buy down” price-flattening soybeans acres.

That’s a red herring because virtually every cent of that $3 billion headed to USDA was spoken for in March, when the bill was written, and long before any 2019 planting delays arrived in May and June.

So why is the White House linking your grain markets to its struggling immigration policy and why is Sonny Perdue using a federal bailout program to push struggling soybean prices lower?

Beats me, but that’s the very nature of paradox, “a seemingly absurd or contradictory statement which when investigated may prove to be well founded or true.”

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The Farm and Food File is published weekly through the U.S. and Canada. Source material, past columns and contact information are posted at farmandfoodfile.com.

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