According to RaboResearch’s Agri Commodity Markets Outlook 2025, global agricultural markets are preparing for a challenging 2025 with the prospect of new tariff disputes following the election of Donald Trump in the US. This development, coupled with ongoing geopolitical tensions and climate challenges, is expected to significantly impact agricultural margins and trade worldwide.
Tariff disputes to impact farmers’ margins
The anticipated tariff disputes, led by the incoming Trump administration in the US, are set to target imports from China, Mexico, Canada, and many other countries. “This move threatens to compress margins for farmers, particularly those producing major grains and oilseeds, which have already seen price declines in 2024,” explained Carlos Mera, head of Agri Commodity Markets Research at Rabobank.
The US imported USD 195 billion worth of agricultural products in 2023, a 280% increase over the past two decades. Potential retaliatory measures from China could further exacerbate the situation, with US soybean exports likely in the crosshairs. With soy prices down 25% over the last year, retaliatory tariffs could put US farmers under significant additional financial strain. The US government may consider compensatory measures, but until such measures are announced, uncertainty prevails.
Ukraine’s agricultural exports expected to decline
Despite the ongoing war, Ukraine has managed to continue exporting agricultural commodities via its Black Sea corridor. This corridor, which hugs the western coast of the Black Sea, has been remarkably successful, allowing Ukraine to continue shipping its exportable surplus. However, the country faces significant challenges, including labor shortages, adverse weather, and low stock levels at the start of the current export season.
“Even without additional Russian aggression, Ukrainian agricultural exports are expected to decline moving forward. When it comes to wheat, there is also a major risk of Ukraine targeting Russian ports, which are responsible for roughly 23% of global wheat exports,” said Mera.
Potential tariffs likely to impact global trade and economic growth
The global economic landscape in 2024 has been shaped by falling inflation and moderate economic expansion. However, according to Mera, “the implementation of US tariffs would raise the risk of fragmenting global trade and financial flows, potentially affecting the availability of US dollars in the rest of the world. Developing nations with high dollar-debt exposure could be particularly at risk. In principle, a strong dollar means lower prices for all dollar-denominated commodities.”
The Federal Reserve and the European Central Bank have cautiously reduced policy rates, but further cuts may be limited due to rising inflationary pressures. The combination of US tariffs and tax cuts is likely to push inflation higher, potentially curtailing the Fed’s ability to cut rates much further next year.
A mild La Niña expected, with minor agricultural impacts
A short and weak La Niña event is expected by the turn of the year, though some effects are already visible, such as delayed rainfall in Brazil and dryness in Argentina and the southern US. The mild intensity of this potential event suggests impacts will be limited. However, the delay in Brazil’s soybean harvest will push back safrinha corn planting, potentially pushing the corn maturation into the start of the next dry season. Currently, weather conditions in the US, Ukraine, Argentina, and Russia have improved, offering a better outlook for the upcoming wheat season.
Climate change impacts crop yields with mixed regional effects
Long-term climate change trends continue to affect agricultural productivity, with varying impacts on different crops and regions. Warmer temperatures are lengthening growing seasons in northern regions, leading to higher yields, while negatively impacting production in low latitudes. Future projections indicate strong negative effects on corn yields. Wheat may benefit from higher CO2 concentration levels and expanded planting areas in high-latitude regions, with potential yield gains.
