COMMODITIES 2025: US-China trade war to drive soybean markets, impact South America

This is part of the COMMODITIES 2025 series where our reporters bring to you key themes that will drive commodities markets in 2025.

A US-China trade war scenario is expected to drive global soybean markets in 2025, with analysts at S&P Global Commodity Insights anticipating a significant drop in US exports in the wake of a promising output in South America creating opportunities for the region.

Analysts expect US marketing year 2025-26 (September-August) soybean carryout to reach 956 million bushels, similar to levels seen during the first US-China trade war, while new crop exports could decline by as much as 500 million bu.

The Trump administration has hinted at implementing tariffs on China, potentially pushing Beijing towards Brazilian supplies upon realization, which could be supportive for FOB premiums in the short term, traders told Commodity Insights. However, export premiums are currently facing downward pressure from the expectations of record output.

"Argentinian Up River prices are currently competitive for the Chinese market, we should expect general shipments to begin strongly during the upcoming 2024-25 season," Guido D'Angelo, senior economist at the Rosario Board of Trade, said. However, "The progress of soybean planting in Brazil is deepening bearish sentiments in the international market."

Trade war to weigh on US new crop

Market participants said that the US will be out of the peak export season by the time the new administration takes over, which means that availability will already be much lower.

In this scenario, US old crop supplies will have relatively less to lose, with analysts only expecting a decline of 50 million bu in exports, but a major decrease for the new crop.

"Our MY 2024-25 price forecast would remain unchanged at $10.30/bu as the decline in exports is moderate," Jack Larimer, senior research analyst at Commodity Insights said. "We see the market already pricing in lower exports to China, however, the timing of the price reaction is uncertain."

However, a massive build in US soybean stocks would likely drag soybean futures sharply lower, with our US-China trade war scenario MY 2025-26 crop year average price forecast falling to $8.80/bu, Larimer added.

In a trade war scenario, Commodity Insights analysts forecast US MY 2024-25 soybean exports at 1.73 billion bu against production of 4.46 billion bu and carryout at 514 million bu,

Similarly, US soybean exports in MY 2025-26 are expected at 1.2 billion bu, down 30.6% on the year, while production is seen near steady at 4.44 billion bu.

Brazilian supplies to drive markets

Analysts expect Brazil's soybean production to rise 16 million mt on year to reach 169 million mt in local MY 2024-25 (January-December), driven by a larger harvested area.

"Recent crop conditions indicate record levels for this time of the year, suggesting potential further increases if favorable conditions persist through December," Silvia Navarro, senior analyst at Commodity Insights said.

"If Brazil harvests the bumper crop most sources are expecting for the 2024-25 season (165-170 million mt), the country will be able to export up to 110 million mt in 2025," Daniele Siqueira, market analyst at AgRural said. "That would be a smashing new record, surpassing the 101.9 million mt shipped in 2023."

Siqueira said that in the case of a new round of the trade war between the US and China, Brazil would be ready to significantly increase its exports to China, but a price spike via export premiums would not be as sharp as in 2018.

Platts price assessment from Commodity Insights showed FOB Santos in December trading higher than FOB New Orleans.

"Harvesting activities are expected to begin modestly early next year, picking up momentum from the second week of February, and although some regions may face localized yield declines due to drought or pest risks, this is unlikely to prevent Brazil from meeting the projections set for the current harvest – or at least reaching something close to 160 million mt," Geraldo Isoldi, agricultural markets analyst at King Korn said.

"The substantial influx of soybeans into the global market naturally tends to exert downward pressure on prices, however, the potential trade tensions signaled by President-elect Donald Trump toward China could provide Brazil with a competitive advantage in international trade," Isoldi added.

Opportunities for Argentina

Market participants expect a potential US-China trade war to be a key factor in determining international prices for the next Argentinian harvest.

"Although the (previous) trade war opened multiple opportunities for Argentine agricultural exports, these tensions also triggered a significant decline in international prices," D'Angelo said. "Now that the elections are over and with a potential slowdown in China's agricultural imports on the horizon, there may be an opportunity for Argentina to increase its exports to China."

Commodity Insights analysts forecast Argentina's soybean production to remain steady at 49.5 million mt in local MY 2024-25 (April-March).

"La Niña is expected to develop in December and is projected to continue through January to March 2025," Navarro said. "Weather patterns in South America appear to be relatively normal, with a persistent dry bias observed in the eastern region of Argentina and a wet bias in the west-central part of Brazil."

However, these conditions are less likely to have any significant impact on production, according to sources.

"A risk for our farmers is that an overproduction of soybeans in Brazil and Argentina, added to this big harvest in the US push the prices to the downward," Javier Preciado Patiño, agronomist and former undersecretary of agricultural markets at Argentina's Ministry of Agriculture said.

"I expect low prices for vegetable proteins, which will put downward pressure on grain prices, both soybeans, and corn, but cheaper prices for these proteins could boost demand for poultry and pork feed, slowing the fall in prices and helping find a floor," Patiño added.