Apr 4 / Ignacio Espinola and Luiz Fernando Roque

Market Update - Trade War and US Prospective Plantings

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• New US tariffs regime brings new dynamics to the markets
• US Prospective Plantings: lower area for soybean and wheat and higher for corn
• Biofuels US: increase from 14% to 17% in the biodiesel mix in Illinois

New US tariffs regime: Trade War 2.0

Last Wednesday, April 2, President Donald Trump announced the new US tariff regime. He chose the so-called “day of liberation” for the announcement.

The basic idea is that for every country that already has import tariffs on products of US origin, the US will apply a tariff equivalent to 50% or more in retaliation. This is the biggest tax increase the US has seen in 95 years. The previous one was in 1930, and the first was in 1828. It's important to remember that these two previous ones caused economic depressions.

This announcement has already had an effect on several important indices, such as the DXY, Dow Jones, S&P500, gold and several others. For the commodities sector, the situation is not so easy to predict.

On the one hand, the US will lose competitiveness regarding other origins, which will probably lead to some efforts to other more favorable countries in terms of cost/taxes. This should push prices down, especially on the physical market side.

The fall in the DXY index, which shows the relative strength of the US dollar regarding other currencies, could benefit the US, as it will make it more attractive to buyers, who will be able to spend fewer dollars in relative terms.

On the other hand, in some cases, the effect can be mixed. When we look at oils, for example, soybean oil exports in the US are currently exceeding the USDA's estimate, while the recent tariffs could affect them. But at the same time, a weaker US dollar should increase the real difference between soybean oil and palm oil, which is already in favor of soybean oil as the cheapest oil available.

For other commodities, such as soybean or corn, the situation is not so simple. On the one hand, China has already reduced its dependence on US soybeans by 35% in the past year and is expected to continue to do so. If we also take into account Brazil's excellent soybean crop, it seems that Brazil will continue to increase its market share regarding the US, which would increase US stocks, causing prices on the CBOT to fall in order to be more competitive. On the corn side, the good Brazilian crop and the lack of buying appetite from other countries, such as China, which imported 23 M tons last year and is expected to import only 8 M tons this year, should also increase the availability of corn in the US, putting downward pressure on prices.

Finally, it is still too early to have a clear picture of the implications of this historic increase in tariffs. The market is still trying to find its way and countries are evaluating how they will respond to these recent changes. It will come as no surprise if retaliations or even new trade agreements take place in the coming days or weeks. For example, China responded to the US tariff announcements with retaliatory tariffs of 34% on all US imports, starting April 10th. This tariffs will include soybeans and it is not yet clear whether this 34% will be added to the current 10% for a total tariff of 44% or whether it will replace the actual 10% for a final 34%. If we take 44% and add the 3% tax and 9% VAT, the effective rate would be around 60%, which could affect US soybean imports to China, which have been declining in favor of Brazil in recent years.

Trump's tariffs: liberation day


US prospective plantings and quarterly stocks reports have opposite biases

A busy week in Chicago. On Monday (31), the USDA's prospective plantings report for the new US crop confirmed the bias expected by the market, indicating a reduction in the soybean area and an increase in the corn area for the 25/26 season, which begins to be sown this month in the United States. Despite this, the figures were slightly different from those expected.

The USDA indicated that the US soybean area in 25/26 should be 33.8 M ha, down 4.1% regarding the area sown in 24/25 (35.3 M ha). The figure was below average market estimates, which pointed to an area of 33.9 M ha.

As for corn, the USDA indicated that the US corn area for 25/26 should be 38.6 M ha, an increase of 5.2% regarding 24/25 (36.6 M ha). Unlike soybean, the corn figure was above average market expectations, which pointed to an area of 38.2 M ha.

US 2025/26 Prospective Plantings Summary (M acres)

Source: USDA, Bloomberg, Hedgepoint

US 2025/26 Planted Areas (M acres) 

Source: USDA, Bloomberg, Hedgepoint


As a result, the report was considered “bullish” for soybean and “bearish” for corn, given the lower production potential for the oilseed and the higher production potential for the cereal in the new North American season. However, futures contracts in Chicago responded with mixed swings, not exactly in the expected direction. This is partly due to the release of the US quarterly stocks report, which brought data with opposite biases to the area.

In the case of soybeans, the report indicated quarterly stocks higher than expected by the market and higher than in the same period last year (+4%). As for corn, the report showed quarterly stocks below market expectations and below the same period in 2024 (-2%).
In general, this data prevented any major adjustments to futures contracts in Chicago regarding the areas of the new North American season, bringing an additional point of attention to the market regarding demand.

In any case, these estimates, at this first moment, can be considered a secondary factor, with the market's focus turning directly to Trump's tariffs.

Price activity

Following Monday's reports (31), Chicago reacted with some interesting price movements. As far as price activity is concerned, the soybean complex ended the day with red numbers, with soybean closing the day with a move of -8.25 cts/bu, soybean meal futures at -0.8 cts/st and soybean oil futures at -0.27 cts//lbs.

Regarding grains, corn and wheat closed with green numbers, with corn closing 4 cts/bu higher and wheat closing 8.75 cts/bu.

Source: CME, Hedgepoint



There are also other factors that should affect the market: tariffs from the Trump administration, weather for planting and developing the new US crop and possible revisions to the biofuel mandates in the US.

For the coming weeks, the market will begin to pay more attention to the weather in the US for the evolution of the different crops, to trade relations between the US and the rest of the world and to the evolution of demand, which at the moment is very focused on the Brazilian soybean program (export commitments so far total 37.3 M tons, an increase of 17.7% over the previous year, with a total of 15.8 M tons in the line-up at the ports for April.

Biofuels USA

In the US state of Illinois, the biodiesel mandate was raised from 14% to a 17% blend as of April 1st. The medium to long-term goal is to increase the mandate to 20%, but the date has not yet been confirmed.

The coalition of oil and biofuels groups is trying to push for biomass diesel mandates in the range of 5.5 to 5.75 billion gallons with the EPA, which is a far cry from the current level of 3.35 billion gallons. They say that the biofuels industry is far below production capacity. This new mandate would add a positive factor to the soybean complex on the demand side, which could bring some support to prices.


Written by Ignacio Espinola and Luiz Fernando Roque
ignacio.espinola@hedgepointglobal.com
Luiz.Roque@hedgepointglobal.com
Reviewed by Luiz Fernando Roque
Luiz.Roque@hedgepointglobal.com
www.hedgepointglobal.com

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