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Grain futures held up relatively well Tuesday, considering the volatility seen across global financial markets in response to rising tensions between the U.S. and Europe over President Donald Trump’s efforts to take control of Greenland.
March corn lost a penny, March soybeans ended 4 ¾ cents lower and March SRW wheat shed 7 ¾ cents.
At the same time, the fact that grain markets ended the day lower despite a sharp fall for major stock indexes, the U.S. dollar and gains for crude oil, events that would typically provide support, underlines the decidedly “risk-off” tone as stateside investors and traders returned from a three-day holiday weekend. The Dow Jones Industrial Average ended the day with a loss of 870 points, or 1.8%, while the S&P 500 and Nasdaq Composite each dropped over 2%.
The market reaction comes after Trump over the weekend threatened to hit several European nations with new tariffs in an effort to persuade them to make a deal on Greenland, the semi-autonomous island owned by Denmark. Trump has repeatedly argued that U.S. control of Greenland is vital to stave off Russian and Chinese interest in the Arctic region.
But it’s the sharp fall for the U.S. dollar and a decline for U.S. Treasuries, both typically seen as safe havens during periods of uncertainty, that was raising eyebrows on Wall Street as gold, also a traditional safe haven, continued to soar. Analysts declared it a return of the “sell America” trade – a bet that investors will require a higher risk premium to hold U.S. assets due to uncertainty around U.S. trade and fiscal policy. Fears that Europe could retaliate by dumping holdings of U.S. Treasuries were also cited, particularly after a Danish pension fund called AkademikerPension said it would exit its U.S. Treasurys position due to concerns about U.S. finances.
A wholesale dumping of Treasuries seems unlikely as it would also cause substantial pain to the dumpees by accelerating a selloff of their holdings. More worrisome is the threat of another round of tariffs and retaliation, with Europe weighing the deployment of its “trade bazooka,” which would effectively block U.S. goods and services from the EU. That threat to services is a big reason why the tech-heavy Nasdaq led the way lower for equities.
Much may turn on Trump’s appearance Wednesday at the World Economic Forum annual meeting in Davos, Switzerland.
Asked at Davos about an emergency summit planned by EU leaders, U.S. Treasury Secretary Scott Bessent urged calm, according to the Associated Press. “I would say exactly what I said after Liberation Day last April, when the president imposed tariff levels on the whole world. I tell everyone sit back, take a deep breath. Do not retaliate. Do not retaliate. The president will be here tomorrow, and he will get his message across.”
It isn’t just Greenland… Not all of Tuesday’s market volatility can be attributed to tensions around Greenland. Concerns about Japanese fiscal policy have served to send yields on Japanese government bonds soaring, dragging global yields, including those on U.S. Treasuries higher (bond yields rise as prices fall and vice versa).
Yields on Japan’s 30- and 40-year bonds both rose by more than 20 basis points, the biggest moves since Trump’s “liberation day” tariff announcements last April sent shockwaves through global markets, Bloomberg noted.
Fears are rising over Japan’s fiscal position and are likely to undercut Prime Minister Sanae Takaichi’s plans to cut taxes and boost spending.
Petroleum, ethanol groups reach agreement… Ethanol groups and the American Petroleum Institute (API) agreed on reforms to U.S. biofuel policy that they would like to see, Argus reported Tuesday, setting the stage for a lobbying campaign aimed at getting the provisions included in federal budget legislation this month.
API and ethanol supporters, including the Renewable Fuels Association and Growth Energy, are aligned around limiting refineries’ future exemptions from biofuel mandates and making changes to bipartisan legislation that would permit a higher-ethanol gasoline blend, the report said. The final framework would authorize sales of up to 15% ethanol – E15 – gasoline year-round.
Dry weather favors early Brazil harvest efforts… Weather conditions in Brazil during the past week allowed for some good early season harvest conditions, World Weather said Tuesday. Rio Grande do Sul into Mato Grosso do Sul and Sao Paulo will now trend mostly dry during the coming week, which will continue to improve maturation and early-season harvest conditions, the forecaster said, while Safrinha, or second-planted corn, planting will also advance swiftly, though establishment conditions may deteriorate due to the lack of rain and warm daytime temperatures drying the topsoil. The need for timely rain will increase late this month into early February for these locations, World Weather said, while other locations in center-west and center-south Brazil into northeastern Brazil will see several waves of rain during the coming week.