The global grain market faced significant volatility last week as major geopolitical and policy developments influenced trade dynamics. The most notable was the escalation in trade tensions between the United States and China. China swiftly retaliated against newly imposed U.S. tariffs by announcing additional levies of 10%-15% on key U.S. agricultural products, including corn, wheat, and soybeans. Additionally, China placed 25 American firms under investment restrictions, further straining agricultural trade between the two economies. The trade war has introduced renewed uncertainty into global agricultural markets, with traders weighing the long-term impact of higher tariffs on U.S. agricultural exports.

In a parallel development, the Mexican Senate approved a bill banning genetically modified (GMO) corn crops, reinforcing its stance on protecting native corn varieties. This move has raised concerns over the future of U.S. corn exports to Mexico, given the country’s heavy reliance on American supplies. This legislative shift aligns with Mexico’s broader push for agricultural sovereignty and sustainable farming practices, though it has been met with criticism from international agribusiness groups who warn of potential disruptions in the grain supply chain.

President Donald Trump also delayed tariffs on Mexico and Canada, initially set at 25%, to April 2, providing temporary relief to North American agricultural trade flows. However, uncertainty remains over the long-term implications of these policies, particularly as the Trump administration has signaled that further tariff escalations are possible. The decision has sparked reactions from U.S. farm groups and ethanol producers, with industry leaders urging the government to avoid protectionist policies that could hinder agricultural exports.

Russia signaled the possibility of limiting grain exports if domestic production falls short of expectations, adding to concerns over global wheat supply. This comes as Russia’s wheat export forecast for the season was revised downward by 1.5 million tons, totaling 40.5 million tons, citing negative profitability for exporters and falling global wheat prices. The potential for additional export restrictions has injected fresh uncertainty into the wheat market, as Russia remains a key supplier to global buyers, particularly in North Africa and the Middle East.

Market Performance and Futures Prices

The futures market saw significant fluctuations throughout the week, driven by trade tensions, weather concerns, and shifting demand expectations.

May Corn Futures began the week under pressure but rallied sharply on March 7 following the U.S. decision to delay tariffs on Mexico and Canada. Corn closed the week at $4.55 ¾ per bushel, reflecting renewed optimism regarding trade flows. Ethanol production trends also provided support, with U.S. ethanol output rising to 1.093 million barrels per day, marking a return to stronger demand levels.

May Wheat Futures remained volatile, initially gaining strength on March 4, only to decline later in the week. Prices were impacted by Russia’s lower export forecast and trade uncertainties. By the end of the week, wheat futures closed at $5.48 ¼ per bushel. Market participants are closely watching European wheat production forecasts, which indicate potential supply increases that could offset some of the declines from Russia.

May Soybean Futures showed resilience despite bearish supply expectations. While Brazilian output forecasts were trimmed, the prospect of increasing Chinese demand due to trade realignments lent some support. Soybeans closed at $10.11 ¾ per bushel, up nearly 13 cents for the week. Notably, China’s soybean imports for January-February totaled 13.61 million metric tons, reflecting a 4.4% year-on-year increase, though March imports are expected to slow due to ongoing supply chain disruptions.

Weather Trends Impacting Crop Production

Adverse weather conditions continued to shape market sentiment, particularly in South America. In Argentina, persistent excessive moisture across the Pampas region raised concerns over potential harvest delays for soybeans, despite earlier dry conditions that had threatened yields. Heavy rains across key production areas in Buenos Aires and Santa Fe have contributed to concerns over potential mold formation and quality deterioration in stored grains. The market remains on high alert for further precipitation, which could impact quality and production levels.

Brazil is experiencing prolonged drought across key soybean-producing states, including Rio Grande do Sul and Mato Grosso do Sul. The hot and dry conditions are elevating downside risks to crop yields, prompting analysts such as StoneX and Celeres to lower their forecasts for Brazil’s 2024/25 soybean output. While Brazil is still expected to produce a record harvest, the reduction in expected yields could tighten global supplies. Reports indicate that Chinese crushers are actively seeking alternative sources, with an uptick in soybean purchases from Argentina and the U.S., despite tariff constraints.

Meanwhile, in North America, warming trends are raising concerns over summer drought risks, particularly in the western Corn Belt. Forecasts indicate a potential for a drier-than-usual growing season, which may impact corn and soybean yields in the coming months. Additionally, freezing risks for winter wheat in the U.S. remain a concern, particularly in the Southern Plains, where fluctuating temperatures have raised questions about crop resilience. The USDA has highlighted the importance of monitoring these developments as planting season approaches.

Export Trends and Demand Outlook

U.S. export sales data reflected shifting global demand patterns. China remained the top buyer of U.S. soybeans, purchasing 206,000 tons for the week ending February 27. However, ongoing trade tensions and additional Chinese tariffs on U.S. soybeans may disrupt future sales. Japan emerged as the largest buyer of U.S. corn, acquiring 303,000 tons, while Mexico continued to be the primary destination for U.S. wheat.

Brazil’s soybean exports are projected to reach 14.8 million metric tons in March, surpassing last year’s 13.5 million tons, as Chinese buyers increasingly turn to Brazil amid the U.S.-China trade dispute. However, Brazilian wheat exports are expected to decline significantly to 145,000 tons, compared to 799,096 tons in March 2024, signaling tighter domestic supplies. Meanwhile, Argentina’s grains export revenue surged 45% year-over-year in February, highlighting strong international demand despite domestic weather challenges.

In Russia, wheat exports hit a five-year seasonal low of 1.9 million tons in February. Analysts anticipate further declines in March, with export volumes projected at 1.5-1.7 million tons, the lowest since 2021. This decline is largely attributed to unfavorable margins for Russian exporters amid high domestic supply costs.

Market Outlook and Strategic Considerations

Looking ahead, traders and market participants must navigate an increasingly complex global trade landscape. The delayed U.S. tariffs on Mexico and Canada provide temporary stability but leave lingering uncertainty over potential future disruptions. Weather risks, particularly in South America and the U.S., will be closely monitored as they could further impact grain supplies and prices.

With Brazil poised to capture more of China’s agricultural import market, U.S. farmers may face increasing competition in the months ahead. Additionally, Russia’s potential export restrictions could tighten global wheat availability, adding an element of price support to the market.

As volatility persists, market participants should remain vigilant, closely tracking geopolitical developments, weather patterns, and shifting demand trends to position themselves strategically in the global grain market.