The grain markets experienced a significant setback in a short period, leaving rural America in shock.
The big questions now:
- Why did this happen?
- What should we do next in terms of grain marketing?
Let’s examine three key market-moving factors:
Tariffs. The ongoing trade war remains highly fluid. As of this writing, tensions are escalating. Both Canada and Mexico announced retaliatory tariffs in response to U.S. measures. These two countries are among the top buyers of U.S. corn and ethanol, making their trade policies crucial to American farmers.
According to the latest USDA data, Mexico was the number one buyer of U.S. corn in 2024, purchasing $5.62 billion worth, while Canada ranked fifth at $449.06 million. However, a substantial volume of unshipped grain remains on the books—approximately 7.8 million metric tons of corn destined for Mexico.
On the ethanol front, Canada is the largest export destination for U.S. ethanol, accounting for 35% of total exports in 2024. Data from the U.S. Census Bureau and the Department of Commerce show that Canada imported 674.6 million gallons of ethanol, while Mexico, the seventh-largest importer, purchased 83.8 million gallons.
Being neighboring countries, Canada and Mexico have a logistical advantage when it comes to importing U.S. corn and ethanol. However, the key concern is whether they will seek alternative sources, such as Brazil and Argentina, which could possibly ship these products at a lower cost than U.S. suppliers burdened by tariffs. The situation remains uncertain, and tariff developments need to be closely monitored.
Managed money. In recent months, managed money played a dominant role in market direction. After building record short positions last summer, the managed money crowd reversed course, pushing prices higher for about six months. Even in January and early February, despite looming tariff concerns, funds continued to add to their long positions.
However, once it became clear that tariffs would be implemented, the managed money crowd rushed to liquidate their positions.
The latest Commitment of Traders Report on Feb. 28 showed that managed money held 333,843 long contracts in corn, a weekly reduction of 25,890 contracts. In soybeans, long positions dropped by 9,990 contracts to 23,714. The upcoming report on March 7 is expected to show further declines in managed money positions.
South America. Lost amid recent market turmoil is the fact that South American harvests are well underway. Favorable weather conditions, particularly in Argentina, boosted production prospects.
The latest USDA Monthly Supply and Demand Report on Feb. 11 pegged Brazil’s corn production at 126 mmt, up from 122 mmt last year. Soybean production saw an even more significant increase, jumping to 169 mmt from 153 mmt the previous year. In Argentina, production estimates are steady despite earlier drought concerns, and recent improvements in weather could lead to upward revisions.
Where are grain markets moving?
The recent market decline was swift and dramatic. But when we step back and look at the bigger picture, fundamentals have not changed significantly over the past two weeks.
The full impact of tariffs remains uncertain. U.S. corn carryout is not excessive and dry conditions persist across much of the Midwest. Additionally, while Brazil’s safrinha corn crop is off to a strong start, dry weather is creeping into key growing regions.
With these factors in mind, now is not the time to abandon your marketing plan. Instead, it’s time to reassess and adjust your strategy. Markets can shift quickly and being prepared is crucial.
If you need guidance in navigating these volatile conditions, feel free to contact me directly at 314-626-4019 or reach out to the AgMarket.Net team at 844-4AG-MRKT.
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