In spite of promises of tariffs improving our agriculture lot in life, details have been scarce in frameworks. The only model we have to gauge future results was signed in President Donald Trump’s first term. In the Phase 1 document, item five of chapter six (page 55) reads:
“The Parties acknowledge that purchases will be made at market prices based on commercial considerations and that market conditions, particularly in the case of agricultural goods, may dictate the timing of purchases within any given year.”
Basically, China said they’d buy our goods if we were competitive, if they needed it and they would not throw their new trading friends (Brazil) under the bus. This made me skeptical then and concerned now. It would have been better to say they “shall” buy a defined amount of bushels per year. In legalese, the word “shall” is binding whereas “may, opportunity, or intent” have no teeth.
- Tariff Deals. So far, only Vietnam’s framework deal has bushels referenced. India says it needs to protect its own agricultural base. Signed deals need to reference hard numbers (quantity or dollars) rather than vague terms.
- Value-Added Focus. For years, I have mentioned the pitfalls of relying on one entity (China) to buy significant portions of our production. Finally, it appears we have a value-added focus under the new proposed EPA Renewable Fuel Standard mandate for biomass-based fuels. The mandate, which includes renewable diesel and biodiesel, is 5.61 billion gallons for 2026. That’s compared to the 2025 biomass-based diesel mandate of 3.35 billion gallons. To meet the proposed 2026 biofuel mandate, it would take about 1.38 billion bushels of soybeans, assuming current feedstock proportions remain constant. It is unrealistic to expect that kind of increase in acres, making alternative feedstock imports and biofuels themselves necessary.
- Import Breakdown. In 2024, the U.S. imported about 441 million gallons of biodiesel from Canada, Germany, Spain and China. It would take about 62 million bushels of soybeans to replace 300,000 tons of tallow from Brazil, 633 million bushels to replace Canada’s 3.3 mmt of canola oil (which produces about 945 million gallons of biodiesel), and 244 million bushels to replace China’s 2.8 billion pounds of used cooking oil.
- In 2026, the Blenders Tax Credit has been replaced by the Clean Fuel Production Credit (45Z). The 45Z credit structure is designed to favor domestic biodiesel production and make it more economically advantageous to use U.S.-sourced feedstocks. Canadian products will be eligible for the 45Z tax credits.
These stats suggest an easy fix to the oversupply of soybeans and corn. If tariffs prove inefficient, a positive EPA result — or even an executive order — will do. The final version of the EPA proposal is up for vote in November after the U.S. soybean harvest. Trump should know time is of the essence.
Any Good News?
The June 30 stocks report revealed the huge increase in on-farm relative to off-farm stocks we saw last year did not repeat. Producers took advantage of old crop premiums and sold in earnest. This suggests the capitulation we saw Aug 30, 2024 might not occur this year. A crop yield of 184 corn and 53.5 soybeans might be what price action is telling us, however. The market, through low prices, could force political action to stop the bleeding. That is what managing risk is all about.
Price Speaks Volumes
The continuous weekly price chart for corn using September as the lead contract reveals while the media concentrated on not only the two important points I mentioned, but on likely hundreds more fundamentals on a weekly basis to analyze market outlook, ultimate price discovery told a different picture.
- Post-Sept. 2024 rally ended Feb. 21. Corn, wheat and soybeans have trended down since.
- Meteorologists blame new corn lows on favorable global weather.
- Markets ignored weather and tariff talk, as no positive signals emerge.
- The large speculator shows long positions maxed out near Feb. 21 and was net short April 16, increasing their short position thereafter for a $1-per-bushel gain.
- Biomass feedstocks are trending up. December corn’s reversal higher is holding. The six-month price discovery may have got prices low enough.
