TURF WAR:
Weighing the USDA anchor
The USDA’s first look at global crop prospects for season 2025 offers prices little traction.
SUMMARY
- Global crop markets add some coarse grain production in 2025.
- Corn’s Turf War gains would ease the tightening in supply from season 2024.
- The crop switch is also partly an unintended consequence of the Trade War.
- Wheat and oilseed supply likely remain comfortable enough.
- And that comfort is why those two so easily conceded ground to coarse grain.
- Prices will continue to have little traction to support large gains.
- The numbers are, of course, still forecasts – these crops must successfully run the weather gauntlet.
G&O Macro
The USDA’s high-level view looks like we expected it to: coarse grain is forecast to get some supply comfort at the expense of other crops. That ‘expense’ looks more modest than we thought it might. Near-term, we think prices will have little traction because these numbers.
The USDA anchor is, of course, only the starting point for the season. Ahead are several months during which crops will run the weather gauntlet. Our Watchlist has a number of worries already. Those worries are sizeable but are not yet especially threatening.
The context does not rule out a more serious tightening across all crops in seasons ahead. The global crop market has kicked the tight-supply can down the road for another season. The result will be that all crop supply will be on the tight side of neutral. And that context makes crop switching harder in subsequent seasons. The Turf War bidding would then become competitive, generating a more general price rise. That prospect is a long way off for now.
Coarse Grain
Coarse grain was the focus issue for crop markets in season 2025. Season 2024 likely bequeaths coarse grain’s tightest supply state in over a decade. So, the market was always likely to attempt to regain some supply comfort.
Corn’s bid for acres stronger than usual. The Trade War weighed on US soybean prices, turbo-charging that Turf War bid. Even with corn’s recent fall (and soybeans’ rise), it remains relatively high. That winning bid though was not anything like a low price, as the second chart below shows.
Oilseeds
Oilseeds did not lose a lot of ground in the Turf War, but there is clearly a drop in their stock ratio. The math of that works because oilseed demand grows more quickly than grains. So the ‘loss’ is more about not gaining enough ground. The stock fall though is not having a lot of impact on prices. Certainly, both Turf War and Trade War are having an impact. But that impact is not enough to lift prices out of their low orbit (see second chart below).
Wheat
The USDA’s numbers have the wheat market a shade tight in season 2025. Very similar to 2024. Wheat prices though continue to languish at very low levels despite that context. That contrast has numerous causes. Large among those causes is the continued build in US wheat stocks. The USDA expects those stocks to reach about 25mmt by end season 2025. The US could easily export 10-plus mmt extra – about 5% of global trade – without making local supply anywhere near tight. Here we see an example where the view from 40,000 feet cannot reveal all the details.
