Grain market oscillates between trade truce and uncertainty

The trade truce signed between the United States and China has brought temporary relief to global markets, but the grain and oilseed chain still faces a challenging and volatile environment. This is shown in the monthly report released by Hedgepoint Global Markets, which analyzes the main drivers of supply, demand and prices in the soybean, corn and wheat segments.

The agreement, signed in Geneva and valid for 90 days, provides for the reduction of bilateral tariffs on agricultural and industrial products, in addition to the suspension of retaliatory measures, such as the Chinese blockade on the export of rare earth minerals. The move brought immediate relief to financial markets: the S&P index rose, the dollar strengthened and the VIX volatility index fell.

However, this relief is temporary. “The structural tension between the US and China is still present and will continue to affect the behavior of economic agents. In addition, markets still have to deal with climate issues, geopolitical risks, US debt and changes in energy policy,” says Thais Italiani, Market Intelligence Manager at Hedgepoint.

Soybeans: Brazil should lead exports 

China’s strategic soybean stockpile has reached record levels of 43 to 44 million tons, which should limit imports in 2024/25. However, the USDA is already forecasting a recovery in demand in the 2025/26 cycle, aiming to maintain this level of food security. This outlook could benefit South American exporters, especially Brazil.

With an estimated production of 175 million tons for 2025/26 (according to the USDA), Brazil is expected to maintain its global leadership in the soybean market. In addition, potentially increased Chinese demand, as a result of the trade war, is already included in expectations of record exports – which should put pressure on domestic stocks and strengthen prices in the second half of the year.

In the United States, the initial estimate for the 2025/26 harvest is 118,1 million tons. But this number depends on ideal weather conditions. Faced with reduced stocks and strong demand for meal and oil, the country tends to have a tight balance sheet, which supports prices, even with slower exports and volumes at risk due to trade disputes.

Corn: ethanol gives Brazil a boost 

The USDA is forecasting a record U.S. corn crop for 2025/26, with the potential to surpass 400 million tonnes for the first time. The robust production will allow export growth but is also expected to increase inventories and pressure prices in Chicago.

Brazil, with an estimated 131 million tons for 2025/26, could benefit from the international scenario, especially if tariffs impact sales from the US and Argentina. In addition, corn ethanol has been gaining relevance in Brazil and is already considered a key factor in sustaining prices in the domestic market. “The strong domestic consumption driven by biofuel is a positive differentiator for Brazil, which helps to mitigate external risks”, highlights Luiz Fernando Roque, Market Intelligence coordinator at Hedgepoint.

On the other hand, factors such as bird flu and a possible reduction in chicken meat exports may affect corn consumption for feed. Since chickens account for 57% of this consumption, this variable deserves attention.

Wheat: US weather puts pressure on production 

In wheat, attention is focused on the adverse conditions faced by winter crops in key US states such as Kansas, Texas, Nebraska and South Dakota. Spring wheat planting is progressing rapidly, above the average of the last five years, but the weather remains a determining factor for the 2025/26 harvest.

Meanwhile, hedge funds are increasing their bets on falling prices. Short positions in corn and wheat have reached historic highs on both the CBOT and the European MATIF exchange, where short wheat contracts have reached a 10-year high.

Soybean complex: funds bet on recovery

In the soybean derivatives market, funds have recently reversed their positions to a more bullish stance, buying soybean and oil contracts but maintaining a short position in meal. This indicates a more positive view on the grain’s industrial and energy uses, as well as pricing in lower U.S. inventories due to a likely smaller crop.

Palm oil: competition returns

In the international market, palm oil prices have once again fallen below soybean oil prices, which could attract some demand and generate additional competition for soybean exporters. Indonesia and Malaysia are expected to see increased production in 2025/26, with stocks remaining stable amid growing exports.