Grim outlook for new crop

Analysts speaking at a recent GrainFox market outlook webinar must have left their rose-coloured glasses in the drawer at home.

Their assessment of the 2024-25 grains and oilseeds market is bleak.

Dan Basse, president of AgResource Company, thinks the market highs are already in for the 2024 crop. He believes soybean futures are heading back under US$9 per bushel, while corn will drop below $4 as the year progresses.

“I’m sorry to say that,” he told growers attending the GrainFox webinar.

The U.S. Department of Agriculture is forecasting Brazil will produce 169 million tonnes of soybeans this year and 127 million tonnes of corn. That is the main reason he expects prices to take another downward slide following American Thanksgiving at the end of November.

It doesn’t help that Brazil’s depreciating real is giving their farmers an advantage over American growers in export markets.

Basse believes the only way there will be a sustained rally is if a serious weather problem develops in South America prior to mid-January.

GrainFox chief market analyst Ranulf Glanville said if South America comes close to meeting the USDA’s expectations, it will “cast a bearish footprint” across grain and oilseed markets.

Planting has already begun in Brazil. He thinks Canadian farmers would be well advised to monitor crop conditions in that region of the world in January and February.

“What happens down there matters significantly to farm prices and profitability in Canada and the United States,” he said.

Basse is also worried about the Donald Trump factor. The U.S. president-elect is going to be a “disrupter” in agriculture markets.

“He is going to come out with tariffs and come out swinging, which is going to really fray the fabric of agriculture in the U.S.”

Basse expects Trump to slap China with import tariffs ranging from 30 to 60 percent on a wide variety of commodities. China will likely respond with tariffs of its own, including duties on U.S. soybeans, which won’t help the price outlook for that crop.

China has been “bulking up” on soybean imports in anticipation of the trade war, so purchases in 2024-25 will likely be lower than they have been in the last couple of years, regardless of whether a trade war erupts.

Basse was already nervous about Chinese grain and oilseed demand because of the country’s aging population, which means declining caloric intake.

He fears the country is going to slide back to its earlier habit of not meeting its World Trade Organization obligations to purchase seven million tonnes of corn and nine million tonnes of wheat annually.

GrainFox’s other chief market analyst, Neil Townsend, agrees that Trump will be the X-factor in 2024-25. He can see the U.S. getting into trade spats with all the BRIC countries, and agriculture is often the target of retaliation.

His concern is that farmers in the U.S. and the European Union are better equipped to handle trade wars than growers in Canada and Australia because their governments have deeper pockets to support them.

The war in Ukraine is another lingering bearish concern in grain markets.

Basse estimates there is maybe a five percent war risk premium built into grain prices. It isn’t much because both Russia and Ukraine are still aggressively exporting commodities.

He thinks there is a 75 percent chance the war will end in 2025, prompting Ukraine to produce and export more grain because it will be in desperate need of foreign currency for the rebuild.

“With that, there’s going to be this bearish flavour that comes out of the Black Sea,” said Basse.

Townsend is more concerned about Russia, where the government is slowly taking over the wheat trade and influencing world wheat prices. Russia had a poor crop in 2024 and he thinks it is unlikely there will be a repeat of that performance in 2025.

Basse was asked about demand drivers that might turn things around.

“I keep looking for them and trying to find them,” he said.

Green fuels are a possibility, but he doubts they will fare well under a Trump administration, which might dismantle the previous administration’s Inflation Reduction Act and its biofuel boosting programs.

Basse believes the only winners in 2024-25 will be livestock and biofuel producers who benefit from cheap grain prices.

Glanville said the other winners could be farmers with diversified rotations who are growing crops like flax and beans that are not traded on an exchange.

Townsend wondered if Mexico might be a bright spot on the demand side. Basse doesn’t think so because the country is taking a hard shift to the left of the political spectrum.

The Mexican peso is down about 20 percent since Claudia Sheinbaum, an environmental scientist, was elected president on June 2.

Mexico is the U.S.’s biggest agricultural customer but that could change under a Trump administration. Basse wonders if a trade war could erupt over the immigration issue and the two leaders might clash over their diametrically opposed political beliefs.

The Mexican economy could collapse under that scenario, resulting in reduced demand for agricultural products.

He also noted that Mexico has experienced several consecutive droughts, and it is time for Mother Nature to be kind, which would also restrict imports.

Townsend said early indications are that U.S. farmers will plant more corn than soybeans in the spring, while Glanville expects Canadian farmers to keep canola acres static or perhaps cut back on acres despite the lack of viable alternatives. Spring wheat acres should be modestly higher based on prices.

Canola is not expected to gain acres due to lingering uncertainty surrounding China’s anti-dumping investigation. However, supplies of the crop are tight due to a disappointing 2024 harvest and a surprisingly strong export program that is running at a pace well ahead of the previous five-year average.

Tags: imports, futures, markets, China, corn, grain, Brazil, prices, soybeans, crop