Uncertainty remains high in the midst of the ongoing trade war between the U.S. and China as American farmers move into their growing season.
The escalation of import tariffs to the U.S. dominates the news and the trade war brings additional volatility to various markets. In addressing the ongoing trade situation, USDA included a special note in April’s supply and demand forecast: “The WASDE report only considers trade policies that are in effect at the time of publication. Further, unless a formal end date is specified, the report also assumes that these policies remain in place.”
Will corn export numbers go up?
Given this backdrop, the USDA increased its forecast of U.S. corn exports in the 2024-25 marketing year by 100 million bushels to 2.550 billion bushels (Figure 1), the highest level since 2021-22. This represents an increase of 11.3% compared to last year. With total export sales commitments of U.S. corn up 22.3% as of April 3. However, some observers see room for additional export increases in future reports.
At the other end of the spectrum, USDA lowered feed and residual use of corn by 25 mbu to 5.750 bbu, reflecting results of the recent USDA Grain Stocks report. With no other changes to the balance sheet, the result was a 75 mbu reduction in ending stocks from the March report to 1.465 bbu. This was below the average trade estimate of 1.510 bbu, but within the trade range of 1.405-1.605 bbu. The ending stocks-to-use ratio is projected at 9.6% compared to the final estimate of 11.8% a year ago.
Soybeans on traditional trajectory
Turning to soybeans, the USDA increased its 2024-25 U.S. crush estimate by 10 mbu (Figure 2) to a record 2.420 bbu, citing “higher soybean meal domestic use and soybean oil exports.” That was partly offset by a 5 mbu increase in imports to 25 mbu. The result was ending stocks lowered 5 mbu to 375 mbu, with a stocks-to-use ratio projected at 8.6%. In the 2023-24 crop year, the corresponding estimates were 342 mbu with stocks-to-use at 8.3%.
Soybean exports dip
Even though the effects of recent changes in tariffs were not considered in the recent WASDE report, the continuation of the trade war possibly will more significantly impact new crop imports and exports. Given that some countries may also decide to add or increase their import tariffs on products bought from the U.S. – or even diversify their markets and buy more non-U.S. products – South America will likely be the main alternative origin for several agricultural products (see Figures 3 and 4).
Competition against Argentina and Brazil’s corn, soybeans, soybean meal, and oil, for example, would increase even further in a scenario of persistent higher tariffs—not to mention the higher production trends seen in those countries, particularly in Brazil.
With that said, several key issues should be monitored moving forward.
According to the Buenos Aires Grain Exchange, as of April 10, corn harvesting in Argentina was only 23.1% complete, while soybean harvesting had just started, with 2.6% complete last week. Dryness and heat affected various areas in the country earlier this season and final yields for Argentina’s corn and soybean crops are still unknown.
In the macro scenario, a new exchange rate regime in Argentina will allow the peso to freely float between a range set by the government starting this month. A possible devaluation of the currency will likely benefit the country’s exports in the future.
What is Brazil’s domestic corn use?
In Brazil, attention is now turned to the development of safrinha, or double-crop, corn, which accounts for more than 75% of that country’s total corn production. Final yields for Argentina’s corn and soybean crops are still to be determined. The majority of pollination for safrinha, or double crop, corn in Brazil is still ahead. So, final production and exports remain at risk.
Following an extended period of dryness, recent rainfall improved safrinha corn crop expectations. With nearly 50% of the crop silking and the beginning of the dry season approaching, more rain will be needed in the coming weeks to keep potential yields near normal levels in key-producing areas across the country, especially in the Central-West.
While production is expected to continue increasing in Brazil, domestic consumption for both corn and soybeans also increased in recent years and may restrict the country’s export surplus, especially for corn. More exports of animal protein increased domestic demand for animal feed, and the rapid increase of corn-based ethanol production in the country continues to keep demand at high levels for the foreseeable future.
Finally, the U.S. growing season is just beginning, with uncertainty quite high surrounding final acreage, crop mix and summer weather. According to the USDA, as of April 13
- 4% of corn was planted (versus the 5-year average of 5%, and versus 6% last year)
- 2% of soybeans was in the ground (versus the 5-year average of 2%, and versus 3% last year).
During a time of market uncertainty, developing and implementing a flexible risk management strategy can help manage price volatility and defend your balance sheet for next year’s crop.
For more insights and personalized advice, consider consulting with a professional risk advisor. Their expertise can guide you through these volatile times, ensuring that your marketing strategies are both effective and resilient. With the right plan in place, farmers can navigate the uncertainties of the market and make informed decisions that support their financial success.
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