Trade Policy Uncertainty Challenges U.S. Grain Sector
Uncertainty surrounding international trade policy continues to weigh heavily on the outlook for U.S. grain elevators and merchandisers.
Ongoing tariff disputes, particularly with China, have significantly reduced new-crop grain sales, pushing them far below historical norms.
Many international buyers are avoiding long-term contracts and instead purchasing on the spot market, creating complications for exporters who depend on consistent foreign demand.
A recent report from CoBank’s Knowledge Exchange warns that if this uncertainty persists, grain businesses may enter the 2025/26 marketing year with increased reliance on local demand, which may not be sufficient in all areas.
“Elevators and grain merchandisers with exposure to high-risk export markets, especially China, may be forced into widening new-crop basis to attract local demand,” said Tanner Ehmke, grains and oilseeds economist with CoBank.
“Basis for corn, soybeans and wheat is strong now. However, if new-crop sales remain lethargic, basis could weaken substantially, particularly for soybeans in the northern Plains and northern Midwest with high exposure to the Chinese market.”
As of May 1, new-crop export sales for soybeans were down 88.2%, and corn was down 26.9% compared to five-year averages. Wheat sales were slightly above average. China has not made any new-crop purchases of U.S. grains, instead increasing imports from Brazil and Argentina.
Other major markets like Mexico and Japan are also behind in soybean purchases, while wheat and corn sales to countries such as the Philippines, Korea, and Latin America are below average.
Despite weak new-crop sales, strong old-crop exports and domestic demand have helped maintain local basis. Year-over-year, total export commitments are up for corn (27%), soybeans (13%), and wheat (14%).
“Elevators with the advantage of strong local demand from ethanol plants, soybean crushers, flour mills and livestock operators will be shielded from the loss of export business,” Tanner Ehmke added.
“For those that do rely on export demand, lower rail rates could provide an opportunity for captive bushels to move east, while a weakening U.S. dollar may attract new export demand from smaller markets to help backfill the loss of sales to China.”