Rabobank predicts challenging conditions for agriculture in 2025

In the Agri Commodity Markets Outlook 2025 report published on December 17, Rabobank experts considered a number of factors that will affect global agricultural markets in 2025. These include possible tariff disputes after Trump's return to the US presidency, geopolitical tensions, a reduction in grain production and exports in Ukraine as a result of the war, and problems related to climate change, in particular the manifestations of the La Niño phenomenon.

 

Trump's imposition of tariffs on goods from China, Mexico, Canada and other countries will reduce the profits of farmers, especially those who grow major crops, the prices of which have already fallen in 2024.

 

According to Rabobank, in 2023, US agricultural imports will amount to $195 billion, a 280% increase over the past two decades. Appropriate measures from China could complicate the situation, with US soybean exports suffering the most.

 

Given that soybean prices have fallen by 25% over the past year, the imposition of tariffs will reduce the income of American farmers. The US authorities may consider some compensation mechanisms, but until they are implemented, the market will remain uncertain.

 

Overall, 2024 was marked by lower inflation and moderate global economic growth. However, Trump’s tariff imposition will increase the risk of global trade fragmentation and affect the availability of the dollar in other countries. Developing countries with a high share of dollar debt may be at risk. Although, in general, a strong dollar will mean low prices for dollar-denominated goods.

 

The recent modest interest rate cuts by the European Central Bank and the US Federal Reserve will continue to be limited by rising inflation, which will rise on the back of tax cuts and new US tariffs.

 

The war in Ukraine continues to reduce grain production and exports, despite the fact that Ukraine has managed to establish supplies via the Black Sea maritime corridor. In addition to military operations, the country will face problems in the form of labor shortages, adverse weather conditions, and low stocks at the beginning of the season. Even without increased Russian aggression, agricultural exports from Ukraine will continue to decline. In addition, Ukraine may attack Russian ports, which provide 23% of world wheat exports, which will complicate the situation on the market.

 

Long-term climate change trends will affect agricultural productivity differently, depending on crops and regions. Higher temperatures in northern regions extend the growing season and improve yields, but reduce production in low latitudes. Projected weather conditions will negatively affect corn yields, while high CO2 levels and increased crop area in high latitude regions will contribute to increased wheat yields.

 

A weak, short-lived La Niña is expected later in the year, which is currently delaying rainfall in Brazil and exacerbating drought in Argentina and the southern United States. Delayed soybean harvests in Brazil will slow planting and second-crop corn ripening. At the same time, improving weather conditions in the United States, Argentina, Ukraine, and the Russian Federation are boosting future wheat crop forecasts.

 

According to experts, in the 2024/25 MY, the ratio of stocks to consumption among major exporters will decrease to 24.5%, which will be the lowest figure after 22.8% in the 2023/24 season.

 

Soybean and corn stocks will remain large in 2025, while wheat stocks are a concern for Rabobank, with prices likely to rise to $7.5/bushel. The soybean market could see a record surplus for the third year in a row, thanks to a good harvest in the US and the prospect of a large harvest in South America. Given the high stocks and stabilizing demand from China, the world’s largest soybean importer, soybean prices will continue to fall even in the absence of trade wars.