Rabobank forecasts challenging conditions for agriculture in 2025

In the Agri Commodity Markets Outlook 2025 report released on December 17, Rabobank experts considered a number of factors that will affect global agricultural markets in 2025. These include possible tariff disputes after Trump returns to the US presidency, geopolitical tensions, a decline in grain production and exports in Ukraine as a result of the war, and climate change issues, including the La Niña phenomenon.

Trump’s imposition of duties on goods from China, Mexico, Canada, and other countries will reduce farmers’ profits, especially those who grow the main crops, the prices of which have already declined in 2024.

According to Rabobank, in 2023, imports of agricultural products to the United States amounted to $ 195 billion, which is 280% more than in the last two decades. China’s retaliatory measures may complicate the situation, which will affect the US soybean exports the most.

Given the decline in soybean prices over the past year by 25%, the introduction of duties will reduce the income of American farmers. The US authorities may consider certain compensation mechanisms, but until they are introduced, the market will remain in uncertainty.

Overall, 2024 was marked by a decline in inflation and moderate growth in the global economy. However, Trump’s tariffs will increase the risk of global trade fragmentation and affect the availability of the dollar in other countries. Developing countries with a high share of dollar debt may be at risk. In general, however, a strong dollar will mean low prices for dollar-denominated goods.

The recent minor cuts in interest rates by the European Central Bank and the US Federal Reserve will continue to be limited by rising inflation, which will grow on the back of tax cuts and new US tariffs.

The war in Ukraine continues to reduce grain production and exports, despite the fact that Ukraine has managed to establish supplies through the Black Sea sea corridor. In addition to the hostilities, the country will face challenges from labor shortages, unfavorable weather conditions, and low stock levels at the beginning of the season. Even without increased Russian aggression, Ukraine’s agricultural exports will continue to decline. In addition, Ukraine may attack Russian ports, which account for 23% of global wheat exports, which will complicate the market situation.

Long-term climate change trends will affect agricultural productivity differently depending on crops and regions. Higher temperatures in the northern regions will extend the growing season and improve yields, but reduce production in low latitudes. Forecasted weather conditions will negatively affect corn yields, while high CO2 concentrations and increased sowing areas in high latitude regions will help to increase wheat yields.

At the end of the year, weak short-term manifestations of La Niña are expected, which is now delaying precipitation in Brazil and increasing drought in Argentina and the southern United States. Delayed harvest of soybeans in Brazil will slow down the planting and maturation of corn of the second crop. At the same time, improved weather conditions in the U.S., Argentina, Ukraine and Russia raise forecasts for the future wheat harvest.

Experts estimate that in 2024/25 MY the stocks-to-consumption ratio of major exporters will decline to 24.5%, which will be the lowest since 22.8% in 2023/24 season.

In 2025, soybean and corn stocks will remain significant, while wheat stocks are a concern for Rabobank, and prices may rise to $7.5/bushel. The soybean market may get a record surplus for the third year in a row due to the good harvest in the US and the prospects of a significant harvest in South America. Given the high stocks and stabilization of demand from China, the world’s largest importer of soybeans, prices will continue to fall even in the absence of trade wars.

Tags: agricultural sector