Wheat futures opened Friday's session with the May 2025 CBOT contract at $5.47 ¾ per bushel, reflecting continued weakness in the market. The wheat sector remains under pressure from strong export competition, primarily from Russia and Ukraine, which continue to dominate global shipments. China's new 15% tariff on U.S. wheat further exacerbates the bearish outlook, as the country has been a minor buyer of U.S. wheat this year. Meanwhile, USDA’s weekly export inspections report showed 389,593 metric tons of wheat were shipped, a slight improvement from the previous week, but still trailing behind Black Sea-origin wheat in global markets. Australia's ABARES has revised its 2024/25 wheat production forecast to 34.1 million metric tons, a 31% increase from the previous year, reinforcing expectations of ample global wheat supplies.

Corn futures started the session lower, with the May 2025 contract at $4.56 ¼ per bushel, down as market participants reacted to heightened trade tensions and weak demand. China’s 15% tariff on U.S. corn imports further dampens export prospects, as the country currently has no outstanding orders for U.S. corn. President Trump’s new 25% tariffs on Mexico and Canada are adding additional uncertainty, with potential retaliatory measures from both trading partners looming. U.S. export inspections showed 1.351 million metric tons of corn were shipped, a year-over-year improvement but still insufficient to support prices. The latest USDA Grain Crushing Report indicated that 457.389 million bushels of corn were used for ethanol production in January, a 4.6% monthly decline, highlighting weaker ethanol demand.

Soybean futures continued to slide, with the May 2025 contract at $10.11 ½ per bushel, facing pressure from an abundant South American harvest and declining U.S. exports. China announced a 10% tariff on U.S. soybeans and suspended imports from three major U.S. exporters due to reported quality concerns. U.S. weekly export inspections showed 695,158 metric tons of soybeans were shipped, a sharp 40% decline compared to the same week last year. Brazil’s soybean harvest is now 50% complete, ahead of last year's pace, contributing to further supply pressure. The USDA’s Fats & Oils report showed January soybean crushings totaled 212.5 million bushels, down 2.36% from December but still 9.41% larger year-over-year.

Key Market Developments and Global Trade Trends

China has swiftly retaliated against the new U.S. tariffs, imposing 10%-15% import levies on American agricultural products and placing 25 U.S. firms under investment restrictions on national security grounds. This trade escalation is creating uncertainty in grain markets, with fears that China could further limit purchases of U.S. wheat, corn, and soybeans, shifting demand toward Brazilian and Argentine suppliers.

Russia’s wheat export forecast was revised downward by 500,000 metric tons to 42.5 million metric tons, citing logistical constraints and currency fluctuations. Despite this revision, overall Black Sea wheat supply remains strong, maintaining competitive export prices and limiting demand for U.S. wheat. Ukraine’s grain exports have slightly declined year-over-year, further impacting global trade flows.

Weather remains a critical factor shaping grain markets. Argentina is facing heavy rainfall and potential flooding, which could disrupt its corn and soybean harvest. Meanwhile, Brazil continues to grapple with extreme drought conditions, particularly in key southeastern growing regions, raising concerns about second-crop safrinha corn production. The latest forecast suggests that dryness could persist into mid-March, heightening supply risks.

In North America, the Northern Plains remain warm and dry, raising drought concerns for the upcoming planting season. The Midwest is preparing for a major storm system, which could bring widespread precipitation, including heavy snow in northwestern areas. The Central and Southern Plains received much-needed rainfall, offering some relief to winter wheat crops.

Global supply chain disruptions continue to impact grain movement. U.S. barge shipments on the Mississippi River have slowed significantly, with corn shipments down 41% and soybean shipments down 38.2% week-over-week. Argentina’s oilseed workers' union is threatening to strike, which could disrupt soymeal and soyoil exports, while China is facing logistical bottlenecks that are delaying grain imports.

The ethanol and biofuel sector is also shaping market dynamics. U.S. ethanol stocks rose 5.2% to 27.57 million barrels, raising oversupply concerns. The Biden administration is expected to review biofuel mandates, which could impact demand for corn-based ethanol and soybean oil for biodiesel production. Brazil is considering lowering import taxes on corn ethanol, a move aimed at improving trade relations with the U.S. while addressing domestic fuel price concerns.

Macroeconomic conditions are adding further complexity to grain markets. The U.S. Dollar Index continues to weaken, making American grain exports more competitive globally. However, inflation concerns persist, with the Federal Reserve signaling that interest rates may remain elevated for an extended period. Crude oil prices have stabilized around $70 per barrel, impacting biofuel margins and transportation costs.

Export trends highlight continued challenges for U.S. agricultural goods. U.S. wheat shipments showed modest improvements but are still struggling to compete with Black Sea suppliers. France’s wheat exports have slightly strengthened, though overall global competition continues to weigh on prices. Meanwhile, China’s demand for U.S. corn and soybeans has slowed, as Brazil emerges as the dominant supplier for both commodities.

Investor sentiment in grain markets remains cautious, with managed money funds reducing long positions in wheat, corn, and soybeans. Market participants are closely watching the upcoming USDA WASDE report and Prospective Plantings report, both of which could provide further direction for grain prices in the coming weeks.

The global grain market continues to face headwinds from escalating trade tensions, adverse weather conditions, and logistical challenges. With China imposing new tariffs on U.S. agricultural goods, South American supplies remaining strong, and demand uncertainties persisting, volatility is expected to remain high. Traders and analysts will be closely monitoring the impact of U.S. trade policies, South American harvest progress, and global demand trends as key market-moving factors in the weeks ahead.