United States President Donald Trump’s tariffs on China and its retaliatory tariffs mean grain elevators and international traders find it difficult to hedge pricing, so they are relying on spot markets and domestic demand instead of exports.
According to a new research brief from CoBank’s Knowledge Exchange, the longer the uncertainty continues to drag on markets, the more difficult it is for elevators and grain merchants.
Especially those who have dealt with China “may be forced into widening new-crop basis to attract local demand,” said Tanner Ehmke, grains and oilseeds economist with CoBank.
“Basis for corn, soybeans and wheat is strong now. However, if new-crop sales remain lethargic, basis could weaken substantially, particularly for soybeans in the northern Plains and northern Midwest with high exposure to the Chinese market,” he said.
As of May 1, U.S. new-crop export sales were well below their five-year historical averages, with soybeans falling 88.2 per cent and corn dropping 26.9 per cent.
China has cancelled orders with several U.S. traders and has bought more from Brazil and Argentina.
Sales to Mexico and Japan, the second and third largest markets for U.S. soybeans, are also lagging well below historical purchases of new-crop soybeans for this time of year.
Wheat sales into major markets such as the Philippines and Korea lag historical levels, while corn new-crop sales to important destinations such as Japan and Latin America are behind average.
Strong old-crop sales and domestic usage that has supported local basis have largely masked the drop in new-crop sales.
Total U.S. export commitments for the 2024-2025 marketing year are up by 27per cent for corn, 13 per cent for soybeans and 14 per cent for wheat year-over-year.
