Agricultural markets so far have not been shaken (already priced in?) as some feared, despite the threats that a 25% import tariff would be levied against close neighbours and allies, Canada and Mexico. The 1st of February looms as a deadline that could alter the shape of trade flows for canola and corn – both major exports from those respective countries. Interestingly, any talk of leveraging an import tariff on China appears to be watered down. The lack of any immediate action on China, meant a reduced trade dispute threat. Financial markets saw this as an opportunity to sell off the USD, softening by about 3/4 USc.
It will be interesting to see what, if any, impact on canola will be. The US imports 90% of its canola oil from Canada, mostly for renewable fuel. An import tariff could derail this trade making more oil and seed available for export into contestable markets. With China and Canada still at loggerheads, it makes sense that Canada will look to markets in Europe, going head-to-head with Australian seed. Global stocks are getting tight, but competition from key markets could see prices come under pressure.
Corn and Beans continued their impressive start to 2025, finding strength in declining US stocks and threats to Argentine corn. Wheat has largely been a follower of corn but has struggled to maintain the same buoyancy. It is questionable if that strength can continue (famous last words) as a combined South America looks to harvest record corn and bean crops, and Brazil is primed to plant a record-breaking safrinha (second) corn crop. It is also widely accepted that Chinese demand will be down year on year.
Argentine corn and bean production is being wound back as dry conditions bite. Corn in poor shape increased week on week from 21% to 28%. As this week progressed, forecast rains of +25mm appear to centre on some of the key agricultural regions. Should they materialise, the slide in crop conditions should be halted although some damage has occurred.
Trade flows on the move?
Next week
One thing to watch is the Russian wheat area weather. Much of the crop remains without snow cover and temperatures take a shift colder as we move into February. Temperatures below -5C will be damaging without meaningful cover
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Click on graph to expand
Click on graph to expand
Sources: USDA, Bloomberg, CommBank, Next Level Grain Marketing, Mecardo
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