A strengthening U.S. dollar, the likelihood of trade wars and the potential for record-large South American crops weigh on the outlook for grain and oilseed prices in 2025. After harvesting the second-largest corn and soybean crops this past fall and the largest wheat crop in eight years, the United States has enjoyed a healthy export program with strong domestic usage helping draw down ample inventories. The return of carries in the futures market has also improved the profit outlook for commercial storage.
Biofuel’s demand for corn and soybeans has domestically been robust. Reduced corn and soybean prices are buffering processor margins and driving record demand from ethanol plants and soybean crushers. Renewable-diesel demand continues to grow but is maturing. The outlook for weaker energy prices diminishes the demand outlook for ethanol, biodiesel and renewable diesel, implying an easing of biofuel-demand growth. Uncertainty regarding the incoming administration’s biofuel policy also overhangs the demand outlook. But the potential for tariffs to slow imports of used cooking oil that competes with soybean oil in renewable diesel could be a positive for U.S. soybean demand. Livestock demand for feed grains will remain positive as end users enjoy profitable feeding margins.
Abroad, economic woes in the U.S. best grain and oilseed export markets – Mexico and China – raise concern regarding their ability to import grains and oilseeds as their currencies weaken against the U.S. dollar. Foreign customers that front-loaded grain and oilseed purchases from the United States ahead of a potential trade war under the new administration are also carrying greater inventories, thereby implying fewer imports in the future.
Export competition is also growing. A weakening of Russia’s currency, the ruble, is expected to anchor global wheat prices as Russian wheat offers become more competitive. But persistent drought conditions in the key wheat-producing regions in Ukraine and Russia offer potential for market volatility in wheat prices with the global wheat stocks-use ratio historically reduced.
In Brazil – the U.S.’s No.1 export competitor for corn and soybeans – the expected continued weakening of the Brazilian real will make exports from Brazil cheaper versus U.S. origin. Assuming normal weather through the growing season, South America is expected to produce record corn and soybean crops – and record exports. Growing crush capacity in South America also implies more export competition for soybean meal and oil.
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