The August 1st deadline for new trade agreements has passed. While Mexico secured a 90-day extension, Canada was not as fortunate, with 35% tariffs applied despite ongoing negotiations. Meanwhile, the EU, Japan and South Korea have agreed on the framework of a trade deal, though details remain scarce.
A new and potentially more aggressive front has emerged, with the US threatening tariffs of up to 100% on any country importing Russian oil. This move seems directly aimed at China and India, with China responding that they, and only they, will decide who they do business with. This escalation does not bode well for the US-China trade deal deadline set for August 12th.
There is not a straightforward relationship between these developments and wheat prices, but the uncertainty alone has been enough to shake markets. Currency volatility is expected, especially if the US enters a recession, and global trade flows are becoming increasingly politicised.
Some nations are increasing purchases of US product to avoid harsher tariffs, for example Bangladesh recently agreed to purchase 200kmt of US wheat as part of a longer-term arrangement to import approximately 700kmt. Others are steering clear of US-origin commodities altogether, for example China is turning largely to Brazil to source corn and soybeans. If US wheat demand drops meaningfully due to punitive tariffs, prices could come under further pressure.
Amid the noise, wheat market fundamentals paint a tightening picture. The USDA projects 2025 global wheat production at 808mmt versus consumption at 809mmt, marking the fifth consecutive year of consumption outpacing production. This imbalance is unsustainable over the long term, though current prices fail to reflect that reality.
The USDA predicts global ending stocks are around 268mmt, with China holding approximately 147mmt, roughly 55 percent, most of which is unavailable to the global market. The exportable surplus, largely from the Black Sea region, continues to set the pricing tone due to its low cost and accessibility.
That said, Ukrainian wheat yields are reported to be underwhelming and Southern Russia is also facing disappointing early yield results. If this trend continues, the market may soon start focusing on tightening Black Sea supplies, potentially just in time for the Southern Hemisphere harvest.
Tariffs, trade and fundamentals collide
The August 1st deadline for new trade agreements has passed. While Mexico secured a 90-day extension, Canada was not as fortunate, with 35% tariffs applied despite ongoing negotiations. Meanwhile, the EU, Japan and South Korea have agreed on the framework of a trade deal, though details remain scarce.
A new and potentially more aggressive front has emerged, with the US threatening tariffs of up to 100% on any country importing Russian oil. This move seems directly aimed at China and India, with China responding that they, and only they, will decide who they do business with. This escalation does not bode well for the US-China trade deal deadline set for August 12th.
There is not a straightforward relationship between these developments and wheat prices, but the uncertainty alone has been enough to shake markets. Currency volatility is expected, especially if the US enters a recession, and global trade flows are becoming increasingly politicised.
Some nations are increasing purchases of US product to avoid harsher tariffs, for example Bangladesh recently agreed to purchase 200kmt of US wheat as part of a longer-term arrangement to import approximately 700kmt. Others are steering clear of US-origin commodities altogether, for example China is turning largely to Brazil to source corn and soybeans. If US wheat demand drops meaningfully due to punitive tariffs, prices could come under further pressure.
Amid the noise, wheat market fundamentals paint a tightening picture. The USDA projects 2025 global wheat production at 808mmt versus consumption at 809mmt, marking the fifth consecutive year of consumption outpacing production. This imbalance is unsustainable over the long term, though current prices fail to reflect that reality.
The USDA predicts global ending stocks are around 268mmt, with China holding approximately 147mmt, roughly 55 percent, most of which is unavailable to the global market. The exportable surplus, largely from the Black Sea region, continues to set the pricing tone due to its low cost and accessibility.
That said, Ukrainian wheat yields are reported to be underwhelming and Southern Russia is also facing disappointing early yield results. If this trend continues, the market may soon start focusing on tightening Black Sea supplies, potentially just in time for the Southern Hemisphere harvest.
Next week
Still not sure if there were any winners and losers in the tariff game. Details remains scarce but the uncertainty continues. Market eyes will be closely watching any developments of a potential ceasefire between Russia and Ukraine.
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Click on graph to expand
Click on graph to expand
Data sources: SovEcon, Reuters, Tridge, Next Level Grain Marketing, Mecardo
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