Trend&Hedge Club discussed factors that will affect wheat and corn prices in 2025

At the traditional Trend&Hedge Club meeting, participants discussed the factors that will affect the corn and wheat markets in 2025, as well as shared their expectations. The bullish team (those who believe that prices will go up) included Arista Trade trader Mykhailo Voronych and Oleksandr Terziev from Kernel-Trade, while the bearish team (those who expect prices to go down) included Viktoria Blazhko, Head of Editorial Content and Analytics at ASAP Agri, and Ihor Vovchenko, Director of UZTK-Trade.

 

How will the market react to a Trump presidency?

The Bears believe that Trump's imposition of tariffs on major trading partners - China, Mexico and Canada - will increase pressure on prices. Mexico buys more than 20 million tons of corn from the United States, but may now switch to Argentina and Brazil, where a good harvest is expected. Then the United States will try to sell corn to Asia and Europe, which will lower prices.

 

At the same time, the bulls do not expect the tariff to have a significant impact on prices, since Mexico will still have to buy corn somewhere, but it will be much more expensive outside the US. And the US monetary policy will have the greatest impact on prices. Now hedge funds are pumping liquidity into the market, as they did during Trump's first term, after which the markets grew rapidly in 2020. The Department of Government Efficiency will seek budget funds for new initiatives, such as deporting migrants or buying Greenland. Against the backdrop of active money printing, which Trump did last time, the funds will begin to "pump" the raw materials markets, which will lead to an increase in prices.

 

Now the prices of corn and rapeseed are less related to the prices of oil and gas, which Trump threatens to collapse in order to force the Russian Federation to end the war in Ukraine. Therefore, raw materials will continue to rise in price, and this process began immediately after the inauguration, as major financial market players expect changes in monetary policy. Even soybean prices are rising, despite its global surplus, and this is unlikely to be related to the drought in Argentina, - explain bullish.

 

Bioethanol market

The bioethanol market is directly related to Trump's intentions to increase oil production. All US states must add ethanol to gasoline. The most common standard is E10, but some states use E15, and for certain types of cars, even E85. But each state can make certain adjustments at its own level.

 

Last term, Trump issued a record number of exemptions to refineries from the mandatory addition of biofuels to fuel, which caused discontent among ethanol producers and farmers.

 

In recent years, the amount of bioethanol added to fuel has remained stable at 15 million gallons. Reducing support for the bioethanol industry will lead to lower prices for energy crops, particularly corn.

 

In addition, one of Trump's first executive orders was to withdraw from the Paris climate agreement, which will allow the US to increase oil production and exports. This will be an additional factor in pressure on the prices of bioethanol and the raw materials for its production.

 

In this case, both teams expect a decrease in demand for bioethanol in the US and, accordingly, in prices for energy crops.

 

Harvest in Brazil

The bullish team believes that the volume of the corn harvest in Brazil will not change significantly, and the US tariff wars will allow the country to increase corn sales to China and Mexico, while the US will try to squeeze Ukraine out of traditional markets.

 

However, the bearish team predicts a record corn harvest in Brazil, which will increase supply and reduce world prices. Experts also remind that Brazil has squeezed out all other suppliers in the Chinese market. Therefore, although China will reduce corn imports this year, it will buy it mainly from Brazil.

 

In addition, Brazil may replace US corn supplies in the Mexican market, which would negatively affect prices.

 

Deliveries to China

USDA predicts a reduction in corn imports to China from last year's 23 million tons to 13 million tons, although local analysts estimate imports at 6-9 million tons. The state encourages Chinese processors to buy corn from local producers. In addition, purchasing activity falls during the New Year celebration period. However, the resumption of purchases in February will probably not affect Ukraine, since China will buy the rest of its corn from Brazil and, possibly, from the United States, unless new trade wars begin.

 

China's economy is weak, its population is shrinking, while its own technologies are developing and yields are increasing, so only a global policy of stockpiling in case of a difficult situation in the future can increase demand for imported corn.

 

At the same time, China is a strong price driver for Ukraine, since any increase in demand will immediately lead to a jump in CPT prices. At the end of the season, traders will work for transshipment, or even in the red, but will be forced to sell to support teams and pay taxes.

 

Wheat market situation

Situational demand in some countries will support the wheat market. Wheat prices will continue to rise against the backdrop of reduced stocks, especially since the Russian Federation has not only large wheat surpluses, but also countries to which it traditionally sells it. The bullish team expects a 11.5% increase in protein wheat prices in the spring to $250/t FOB, and forage prices to rise in the near future to $225/t CPT and to $250/t in a few months, depending on monetary policy.

 

What do experts expect?

Experts consider the corn market in Ukraine to be overheated, and the maximum price level is estimated at $216-218/t CPT, so they predict a decrease in quotes soon.

 

By the end of the season, Ukraine can export about 16 million tons of grain, including 9.5 million tons of corn, up to 5 million tons of wheat and 1-1.5 million tons of soybeans, that is, an average of 3 million tons per month, which looks quite realistic. Competition in the market remains high, and terminals are interested in the products, so the transshipment market is expecting changes.

 

Wheat prices will remain high until the new harvest is known. The change in export quotas from the Russian Federation will reduce supply and increase demand for Ukrainian and Romanian wheat. If corn prices are $215/t, feed wheat will be even more expensive.

 

It is worth considering that wheat from Australia and Argentina, which harvested higher yields than last year, has entered the market. This will increase competition with sellers of Black Sea wheat, which will contribute to a decrease in prices. In addition, Romania will soon intensify the sale of its large wheat stocks, which will increase the pressure on quotations.