Uncertainty blurs commodities markets
Data from the US Department of Agriculture’s (USDA) March 31 Prospective Plantings report indicated more acres planted to corn and fewer acres to wheat and soybeans in 2025.
In markets, the projections were quickly overshadowed by uncertainty and ever-changing US tariffs on nearly all imported goods, including commodities, plus retaliatory tariffs imposed by several countries on imports of US goods and US port fees on Chinese-made vessels. Tariffs and port fees may eclipse weather as the greatest unknowns in this year’s market.
Even though tariffs are the major price-moving and unsettling factor in nearly all markets (especially equities and crude oil), they’ve so far shown a tendency to be changed at a moment’s notice. As of this writing, tariff conditions with the three largest US trading partners — Mexico, Canada and China — are vastly different. Goods and commodities covered under the United States-Mexico-Canada Agreement (USMCA) remain exempt, although a potential 25% tariff on US imports from both countries remains a possibility. Meanwhile, tariffs have surged between the United States and China, the largest buyer of US soybeans.
Amid near-constant uncertainty surrounding financial and commodity markets since the White House’s April 2 announcement of a universal 10% tariff increase and higher individualized “retaliatory” tariffs (most since paused for 90 days) for more than 50 countries, a winner of sorts has emerged in grains: old-crop corn.
Resisting tariff winds, the CME Group May and July futures contracts have crept higher since then, with May settling at $4.69 per bushel and July at $4.74¾ at the end of trading April 8. Much of that has been driven by the White House’s somewhat surprising decision to spare — at least for now — top US corn-importer Mexico from any additional levies, meaning corn trade to the south remains tariff-free under the USMCA, which President Donald Trump negotiated during his first term.
“With old-crop corn, the interesting thing with these tariffs so far is if you look at prices, we’re kind of flat to higher since April 2,” said Patrick Sparks, vice president of Global Risk Management. “I think corn is feeling a little bit unscathed from these tariffs. It’s clearly a developing situation. The biggest thing there is Mexico being spared under the USMCA, and them being our biggest corn export customer.”
In its March 31 Grain Stocks report, the USDA estimated corn stocks in all positions as of March 1 at 8.151 billion bushels, down 2% from the year prior.
“So with the old crop, we’re not exactly in a state of oversupply,” Sparks explained.
According to the USDA’s export inspections for the week ended April 3, current marketing year corn exports were at almost 35.6 million tonnes, about 8.2 million tonnes, or nearly 30%, ahead of the same period a year earlier.
Of $13.92 billion in total US corn exports in 2024, Mexico and Canada together took 44%, according to data from the Foreign Agricultural Service (FAS) of the USDA. Both remain exempt from tariffs under the USMCA. China took just 2.4% of US corn exports last year. Any new trade developments with Japan (20% of exports), Colombia (11%) and South Korea (5%) could pressure values, though how much is an open question.
“At the end of the day, in the short term, it’s almost like these corn exports are just going to continue humming along,” Sparks said. “We keep running export sales and shipments very strongly, and I think that will continue for at least a few more months.
“That should be supportive of old-crop pricing — I just don’t see a lot of downside there.”
He offered a price target of $4.50 to $4.60 per bushel for the May and July futures, down about 20¢ below levels prevailing mid-week earlier this month.
With US farmers beginning to plant spring crops, new-crop corn presents a different range of features. In its first Crop Progress report of the new crop year, released April 7, the USDA said corn planting was 2% complete, in line with analysts’ estimates and the five-year average.
US corn acreage is expected to be up this year, with farmers’ intentions at 95.3 million acres, an increase of 4.7 million acres, or 5%, from the year prior, according to the USDA’s March 31 Prospective Plantings report, which exceeded the average of analysts’ estimates. Acreage would be the largest since 95.4 million in 2013 and could grow further if farmers choose to plant more corn instead of soybeans, which face stiffer tariff headwinds.
“The acreage report came in not quite 1 million acres higher than the average trade guess,” Sparks said. “That’s a pretty solid number above expectations. We’re looking at the highest corn acreage in 12 years. At the end of the day, Mother Nature is going to have her say, but if we get normal weather, I see no reason why we can’t drop 50¢ or more from these current new-crop futures values into later this year. That would put us down around $4 corn.”
The biggest pressure point for corn values — both old-crop and new-crop — may not be tariffs but what happens with new levies and restrictions proposed by the Office of the US Trade Representative (USTR) on importers and exporters that use Chinese-made vessels, Sparks said.
The proposed penalties, intended to boost US shipbuilding, include fines of up to $1.5 million for each Chinese-made ship that calls on a US port and could increase the cost of shipments from $15 to $40 per tonne, or 50¢ to $1.25 per bushel, on vessels carrying agricultural exports, according to industry estimates.
“The Chinese ship issue has kind of been taking a back seat to some of the tariff news, but that could be an extremely big deal if it goes through as discussed,” Sparks said. “It could be so damaging and impactful to all our exports. Potentially 50¢ to $1.25 per bushel added to values is just crazy. You’re looking at maybe 30% of the total value of corn being added on top. And that’s why there’s been such tremendous industry pushback on that issue. The White House has started to look at different ways they could make that legislation less impactful, so it does feel like the industry is being heard. But still, potentially a huge issue.”
Millers and bakers navigating the wheat markets in 2025 received some direction when the USDA on March 31 projected near record-low US wheat acres, spring wheat acres at a 55-year low, and estimated March 1 wheat stocks up 14% from a year earlier. Price direction in the next three quarters of 2025 could shift on the evolving tariff landscape, weather in the dry northern Plains and other factors in the wait-and-see category.
The USDA’s Prospective Plantings report highlighted the continued incursion of row crops westward from the Red River Valley into the northern Plains and the resulting spring wheat acreage decline. The Department’s National Agricultural Statistics Service division (NASS) said farmers intend to plant 10.020 million acres to spring wheat other than durum in 2025, down 6% from 10.625 million acres in 2024 and the lowest since 9 million acres were seeded to other spring wheat in 1970. NASS projected the area planted to all-wheat for harvest in 2025 at 45.350 million acres, down 2% from a year earlier and the second lowest (after 2020) in NASS records dating to 1919.
“The returns for all crops are pretty poor,” said Bill Lapp, founder and chief economist with Advanced Economic Solutions, Omaha, Nebraska, US. “In the case of corn and soybeans, wheat acres will shift to corn over soybeans, not because it’s an attractive crop to grow, but rather it’s the best-looking horse in the glue factory. We’re going to plant more corn acres overall, and probably more of it in the northern Plains as well. Farmers up there continue to have better success in corn farther and farther west. Yields are reliable enough, and the potential for better returns is pushing them in that direction. We’ve seen that in South Dakota and certainly in Kansas, where (row crops) are replacing hard red winter wheat.”
In North Dakota, the largest spring wheat state, acreage was projected to decrease 6% from 2024 to 5.050 million acres. Increased corn acreage offset decreased soybean acreage there. Spring wheat plantings in Montana were expected to decrease 12% from 2024. Those acres in large part may have been switched to hard red winter wheat acres, which the USDA projected up 18% from 2024 to 2.3 million acres.
Lower spring wheat acres in Montana and North Dakota make for a bullish outlook on spring wheat, said Mike O’Dea, risk management consultant for StoneX, Kansas City.
“We’re going to continue to lose wheat acres over time to corn and soybeans, but this year, with prices lower, it’s even a little more noticeable,” O’Dea said. “Spring wheat came in even a little below what we expected. It’s going to take a really good growing season or higher prices to get the spring wheat producer to plant more acres. There’s a big short (in futures) also, specifically in Paris and Chicago. I’m actually more friendly Paris wheat than I am anything because of weather over there, (and export curbs and potential crop weather problems in) Russia. So we could get a pretty good short-covering bounce over there and drag the US markets up with it. Spring wheat’s my outlier. Just going to have to see how this crop evolves and see where the tariffs are at. I’ve got a friendly bias, but it’s not a runaway, just mainly a bit under the markets to keep the markets from dropping.”
Also, NASS on March 31 said stocks of wheat held in all positions in the United States on March 1 totaled 1.237 billion bushels, up 14% from a year earlier. Wheat stocks in the five Southwest wheat states totaled 450 million bushels, up 46% from March 1, 2024.
“Hard wheat is well-oversupplied looking at the balance sheet, mainly because we’re carrying in an extra 100 million bus versus a year ago,” O’Dea said.
Threatening to shift global trade patterns in ways yet unknown was the brief enactment of tariffs on goods imported into the United States from major trading partners. That prompted retaliatory tariffs. China placed a 49% tariff on US wheat beginning April 10. But China’s wheat imports had dropped sharply from the first half of 2023. China’s share only accounted for 8.2% of US wheat exports in 2024, and the country last bought US wheat in September 2024. At mid-week, most tariffs were paused for 90 days.
So far, agricultural trade has fallen under exemptions in the USMCA in the cases of Canada, which grows more spring wheat than the United States and is a vital trading partner, and Mexico, the top export market for US wheat, taking $1.05 billion, nearly 18% of all wheat exports. The US Trade Representative’s proposed Section 301 port fee on all Chinese-built vessels complicated the prospects for US imports. Anecdotally, some millers already have opted for Canadian wheat at a higher price to avoid the potential port fee.
“(Earlier) we thought that Canada might have to walk away from canola and plant more spring wheat,” Lapp said. “Now, we’re not so sure because we’ve opened the door with Canada and Mexico not included in the April 2 widespread tariffs. The final Canadian spring wheat number and canola are still kind of mysteries, and if there’s a switch away from canola to spring wheat, that would offset some of the (US) decline.”
Lapp said Kansas City wheat futures prices were anchored by corn prices “down plus or minus $4.25 a bushel” amid higher planted acres and a growing supply situation for corn.
“Not much support for the wheat market with that corn crop,” Lapp said. “If we get a good crop in hard red winter wheat country, those deferred values in September-December KC markets should gravitate back toward where the nearby sits. You might see $5.40 to $5.60 in September and December.”
Chicago wheat’s downside is limited by smaller acreage and potential crop problems, Lapp said.
“The 20¢ discount that we’re seeing in the nearby right now for Chicago versus Kansas City might be a bit extreme once we have the harvest and get into fall,” he said. “Spring wheat’s a pretty big mystery. Of the three classes, I’d be a little more concerned about Minneapolis. It may take some time and effort to push the Minneapolis market below the $6 (per bushel) level.
O’Dea suggested end users book “cheap” hard wheat basis, but he forecast a mostly steady path for spring and soft wheat bases.
“The market’s pretty well-supported here,” he said. “I think they’ll be buying underneath the market on breaks. If we could get KC July back down to $5.50 (per bushel), it would be a hell of a buy (at) $5.50 to $5.60. But I think the market’s going to drift back north to $6 in KC July. Chicago July probably grinds somewhere between $5.75 and $6. Minneapolis is the one we’ve got to watch. I think that at $6 it is underpriced for what we know today.”
The market was awaiting the start to spring wheat futures on the CME Group exchange in competition with the Minneapolis spring wheat futures exchange owned by Miax Futures.
“We’ll see who migrates where when we have Chicago spring wheat trading at the same time you have Minneapolis spring wheat trading,” O’Dea said. “I think the cash market, millers and the big cash traders all stay with the Minneapolis contract. You’ll see the speculative trader that wants to see more volume, more liquidity, will trade Chicago. But no one wins in the end. There’s only room for one spring wheat contract.”
As expected, farmers intend to plant fewer soybeans this year, reducing planted area by 4% to 83.495 million acres, down from 87.050 million acres in 2024, according to the USDA’s Prospective Plantings report. Growers in 22 of the 29 reporting states said they planned to shrink their soybean area, including the top two producing states of Illinois and Iowa, which were expected to reduce their soybean area by 3% and 4%, respectively.
The USDA’s March 31 projection was slightly lower than the average pre-report trade forecast of 83.762 million acres, but the market seemed unbothered by the bullish tone, paying more attention to signs of an emerging global trade war initiated by the Trump administration.
After Trump’s April 2 tariff announcement, which included a combined 54% levy on goods imported from China, the top buyer of US soybeans, China retaliated by slapping a 44% tariff on several US imports, including soybeans. By April 4, the CME Group July soybean contract had tumbled 3% in two days to a multi-month low of $9.93 per bushel, deflating any opportunities for strength derived from the Prospective Plantings report.
“The China tariff news certainly is disappointing but not completely unexpected after the US tariff announcements,” said Brian Harris, executive director and owner of Global Risk Management. “As China will be using Brazil almost exclusively for the next several months, any rally potential for soybean values will likely have to come from a US weather issue, especially since planted acres will be down substantially.”
Harris said he expects new crop November soybean futures to average between $9.60 and $9.75 a bushel, assuming the trade war with China continues and weather cooperates throughout the growing season, but prices might jump as high as $10.75 a bushel if severe weather disrupts the crop. He also believes China may still need to purchase US soybeans, despite the tit-for-tat tariff squabbling.
“It seems like China is never going to take another bushel from us, but what we have to remember is that even though we have record crops in South America, the Chinese have got to eat,” Harris said. “We might get into the middle part of summer and start seeing a little bit of Chinese buying popping up despite the tariffs, just in the fact that Brazil begins to run a little tight on their soybean availability.”
The actual volume of US soybeans exported remains to be seen, especially as the trade war between the United States and China intensifies. On April 9, Trump further increased tariffs on Chinese goods, in response to China’s retaliation, bringing the total duty on US imports of Chinese goods up to a minimum 125%.
The US soybean co-products markets, however, provided some opportunities in both domestic and international areas. Since 2020, the volume of US soybean meal exports has risen 27%. Domestic consumption also has risen steadily. In its latest supply and demand report, the Department pegged 2024-25 domestic soybean meal usage at 40.225 million tons, up 4% from 38.604 million tons in 2023-24.
Soybean oil exports also have grown, especially as the price of palm oil, the world’s most consumed vegetable oil, escalated and the price of US soybean oil plunged. The USDA in its March Oilseeds World Markets and Trade report said the price of US soybean oil by early March had transitioned from the most expensive edible oil on the global export market to the least expensive in a one-year period.
This competitively advantageous conversion caught the eye of several importing countries, including India, the world’s leading importer of vegetable oils. In January, US monthly soybean oil exports to India reached a near three-year high as the country shifted a significant portion of its market share away from high-priced palm oil imports. But as with other commodities, whether this strong export pace will endure largely will be determined by the impact of US tariffs.
The US soybean oil market found renewed strength in the domestic biofuel market. After hovering near contract lows, a recent directive from the Trump administration calling for “Big Oil” and biofuel industries to form a coalition to discuss mutually acceptable biofuel policies provided an unexpected boost to the US soybean oil market.
“We want to keep a close eye on any chatter coming out of Washington on the biofuel policy,” Harris said. “Just a mere whiff of getting a program together and in place makes a loud statement that the Trump administration is not going to completely abandon the biofuels program, which was a big fear and a big reason soybean oil futures couldn’t rise too much above 40¢ a pound.”
Since the coalition meetings began, July soybean oil futures have jumped 17% from the March low of 41.74¢ a pound, and it was the only component of the soy complex to end the week with gains after the April 2 tariff announcement. But since then, soybean oil futures have been sliding lower as the threat of US tariffs become a reality and begins to chip away at the prior competitive advantage on the global market.
While tariff actions will continue to influence nearly all markets, the agricultural commodity markets’ next fundamental data comes in the USDA’s May World Agricultural Supply and Demand Estimates report that will include 2025-26 projections for exports and crop production in major export competitors, such as Argentina and Australia.
Further development of the grain sector in the Black Sea and Danube region will be discussed at the 23 International Conference BLACK SEA GRAIN.KYIV on April 24 in Kyiv.
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