Week ending 1/31/25

After eight strait weeks of higher trade the markets finally relaxed and closed lower this past week thanks to fund movement at month end and imposing tariff talk. March futures closed 5 cents lower on the week while May and July closed 4 and 1 cent lower respectively. The funds ended the week long 354,789 corn contracts and 72,035 soybean contracts.

On Saturday President Trump announced that he would hit both Mexico and Canada with 25% tariffs while adding an additional 10% tariff on China. How the whole thing plays out is going to be critical not just for Agriculture but the economy as a whole and Trump is not taking on small targets this time as Canada and Mexico are the top two trade partners of the US. Mexico, Canada and China account for 50% of the US Agriculture export destinations. President Trump was also quoted as saying the tariffs could increase to as much as 50% if Mexico and Canada decided to retaliate. As of this writing, Canada has levied tariffs on imported U.S. fruit and alcohol and Mexico was planning on retaliating but had not named specifics.

As expected, the corn market saw pressure from the expectations of Saturdays announcement resulting in corn trading lower to end the week. Day one of the tariffs will be Tuesday, February 4^th. The trade will be waiting to see if there are material changes in the global balance sheets or a shift in trade flows from the tariffs before moving too much. For now, expect choppy markets over the short term amid headlines of trade.

Weather continues to play a big role in South American corn/soy production. Weather models are unchanged in their 10-day outlooks, while the 11-15 period is wetter for Argentina. There will be a point when the Trade loses patience in what could happen and will start trading what has happened.  For now, the chance of rain and a big crop is still alive.

Tariff concerns will hang over the grain markets until the trade has a handle on U.S. policy with Mexico, Canada, and China. Trade flows may shift, but I do not think this will be long-lasting, so don’t discount the trade interpreting this as business as usual. There are a lot of unknowns going forward, but I think the trade is better prepared than the first time around.

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