Strong Dollar and Policy Uncertainty Threaten U.S. Grain Demand
Washington, Thursday, 5 December 2024.
The strong U.S. dollar and policy uncertainties are reducing international demand for corn and soybeans, impacting grain elevators’ profits despite record harvests.
Record Harvests Meet Export Headwinds
U.S. farmers have achieved remarkable production levels in 2024, harvesting the second-largest corn and soybean crops on record [1]. However, this abundance comes at a challenging time as corn and soybean prices have fallen to four-year lows [1]. The strong U.S. dollar is creating significant headwinds for exports [1][4], with recent data showing corn export sales dropping to 200,000 metric tons, down from 400,000 metric tons in the previous week [4].
Shifting Market Dynamics
The latest export data reveals a complex market situation. Weekly wheat sales reached 378,200 metric tons, with South Korea and Mexico emerging as key buyers [2]. Soybean sales have shown resilience at 2,312,700 metric tons for 2024/25, with China leading purchases at 669,700 metric tons [2]. However, the strengthening dollar continues to make U.S. grains more expensive for foreign buyers [1][4], potentially affecting future sales performance [GPT].
Domestic Market Response
Despite export challenges, domestic demand shows some positive signs. The Purdue University CME Group Ag Economy Barometer index reached 145 in November 2024, marking a 30% increase from October and the highest sentiment level in three years [3]. This optimism is partially driven by increased U.S. biofuel production and robust livestock feed usage [1]. However, uncertainty over biofuel policy under the incoming administration raises questions about the sustainability of domestic demand for corn-based ethanol and soybeans used for biodiesel [1].
Future Outlook and Storage Strategy
The combination of growing global supplies and slowing exports is creating a strategic shift toward storage solutions [1]. Grain elevators are expected to benefit from bigger carries in the futures market and cheaper basis in the months ahead [1]. Looking forward, 34% of surveyed farmers expect improved financial conditions by December 2025, up from 19% in October 2024 [3], though over 40% express concerns about potential trade wars affecting U.S. agricultural exports [3].