Global agricultural markets are preparing for a challenging 2025 with the prospect of new tariff disputes following the election of Donald Trump in the US.
This development, coupled with ongoing geopolitical tensions and climate challenges, is expected to significantly impact agricultural margins and trade worldwide.
This is according to a new report by RaboResearch, which says that Donald Trump's anticipated tariff disputes are set to target imports from China, Mexico, Canada and others.
“This move threatens to compress margins for farmers, particularly those producing major grains and oilseeds, which have already seen price declines in 2024,” explained Carlos Mera, researcher at Rabobank.
The US imported $195 billion worth of agricultural products in 2023, a 280% increase over the past two decades.
Potential retaliatory measures from China could further exacerbate the situation, with US soybean exports likely in the crosshairs.
With soy prices down 25% over the last year, retaliatory tariffs could put farmers in the United States under significant additional financial strain.
According to the report, the US government may consider compensatory measures, but until such measures are announced, uncertainty prevails.
The global economic landscape in 2024 has been shaped by falling inflation and moderate economic expansion.
However, the report said that the implementation of US tariffs would raise the risk of fragmenting global trade and financial flows, potentially also affecting the availability of US dollars in the rest of the world.
Developing nations with high dollar-debt exposure could be particularly at risk. In principle, a strong dollar means lower prices for all dollar-denominated commodities.
The Federal Reserve and the European Central Bank have cautiously reduced policy rates, but further cuts may be limited due to rising inflationary pressures.
The combination of US tariffs and tax cuts is likely to push inflation higher, potentially curtailing the Fed’s ability to cut rates much further next year, the report said.
Elsewhere, despite the ongoing war, Ukraine has managed to continue exporting agricultural commodities via its Black Sea corridor.
This corridor, which hugs the western coast of the Black Sea, has been remarkably successful, allowing Ukraine to continue shipping its exportable surplus.
However, the country faces significant challenges, including labour shortages, adverse weather, and low stock levels at the start of the current export season.
Mr Mera said that even without additional Russian aggression, Ukrainian agricultural exports were expected to decline moving forward.
"When it comes to wheat, there is also a major risk of Ukraine targeting Russian ports, which are responsible for roughly 23% of global wheat exports,” he said.
