|
Getting your Trinity Audio player ready...
|
On-again, off-again tariff talk kept agricultural markets on edge with the inauguration of U.S. President Donald Trump.
Living up to his name, the president’s whims and proclamations have a tendency of trumping anything else going on, and the early days of the new U.S. administration promised more of the same.
While the initial flurry of executive orders on Jan. 20 included no direct mention of the import tariffs Trump had threatened to impose, the can was merely kicked down the road with Feb. 1 as the latest target date for the start of a potential trade war with Canada’s largest trading partner.
Whether or not actual tariffs ever come into effect remains to be seen, with the resulting retaliation also still very much up in the air. Uncertainty over U.S. biofuel policy is also overhanging the markets and could lead to sharp price movements depending on how things shake out.
Trump-effect volatility will be a perennial market-moving factor in the months and years ahead, but life goes on and the traditional fundamental issues influencing grain pricing have not been totally overshadowed.
South America: The soybean harvest in Brazil is reportedly off to its slowest start in four years, with less than two percent of the soybeans harvested as of mid-January. That compares with last year’s six percent pace, with heavy rains in key soybean-growing states causing delays. Brazil’s second corn crop that goes in the ground after soybeans accounts for about 75 percent of its corn production, but seeding has also been delayed.
The seeding and harvest delays have supported soybean and corn prices, although production of both crops is still expected to hit new records.
The situation is completely different in neighbouring Argentina, where heat and dryness have raised concerns over the state of the crops there. Argentina is a major exporter of soy oil and meal.
South American harvest progress, or the lack thereof, will be an important market-moving factor through the next few months with exports out of the region also on the radar as those crops come off the field.
The nature of Brazil’s warmer climate limits opportunities for on-farm storage, which means newly harvested supplies typically find their way to export channels quicker than they may in North America. China is a major buyer of both soybeans and corn, with the threat of increased trade tensions between China and the U.S. under Trump possibly encouraging even more business. However, phytosanitary concerns caused China to block soybean purchases from five Brazilian companies in mid-January — adding another twist to the global trade story.
North America: Spring seeding may still be months from now, but the annual ‘fight for acres’ is already well underway as market participants start to look towards 2025 production.
While Trump was busy signing executive orders on Jan. 20, Agriculture and Agri-Food Canada released their first supply/demand estimates for the 2025/26 marketing year. The early call from the government agency was for an increase in wheat and barley acres largely at the expense of canola.
Canadian wheat acres, including durum, were forecast to rise by two percent on the year at 27.25 million acres. Given trendline yields, wheat production is forecast to increase to 35.025 million tonnes from 34.958 million in 2024/25.
Meanwhile, the canola area is forecast at 21.00 million acres by AAFC which would be down by roughly a million acres on the year. Total canola production is forecast to drop by two percent in the year to 17.500 million tonnes in 2025/26. Canola ending stocks are to tighten to 950,000 tonnes, from an expected 1.250 million tonnes in the current marketing year and 2.748 million tonnes at the close of 2023/24.
On their own, a smaller acreage base, lower production prospects, and tightening stock estimates all bode well from a pricing standpoint.
Statistics Canada’s acreage estimates will be released in mid-March, with the U.S. Department of Agriculture’s prospective planting numbers not out until the end of March.
Source: Manitoba
