When Donald Trump was re-elected president, the shockwaves weren’t confined to politics — they rippled through the global agricultural economy. Markets, ever sensitive to the whims of geopolitical change, began to react even before Trump’s inauguration. Commodity prices vacillated in sync with campaign developments, reflecting traders’ expectations about the new administration’s trade policies.
“You could see the markets react in real time,” says Owen Wagner, Senior Grain & Oilseed Analyst for Rabobank. He spoke today at Manitoba Seed Industry Days held in Winnipeg. “Every time Trump gained momentum, soybean prices would fall. Conversely, when it looked like the Democrats had the upper hand, prices would rebound. It was a clear signal that the market was bracing for a second trade war.”
Trade Wars Redux?
The prospect of another trade war looms large. Trump’s earlier presidency saw escalating tariffs with China and strained relations with key trading partners. Wagner points out that Trump’s rhetoric on tariffs has already sent shockwaves through currency markets.
“The Canadian dollar, for instance, has fared better than some other currencies because of the belief that NAFTA will remain relatively unscathed,” says Wagner. “But relatively is the key word. Trump’s talk of 25% tariffs on Canada and Mexico could still upend cross-border trade dynamics.”
For Canadian farmers, a weaker loonie offers mixed blessings. “It’s great for exporters,” Wagner explains, “but for those needing to import equipment or other inputs, costs could climb.”
The Energy Conundrum
Beyond trade, the Trump administration’s impact on the energy transition adds another layer of uncertainty. Wagner highlights the apparent contradiction in Trump’s policy moves.
“On one hand, you have Elon Musk playing a prominent role in the campaign — a peculiar alignment given Trump’s vocal skepticism about EVs. On the other, Trump’s pick of Lee Zeldin to lead the EPA signals potential trouble for the Renewable Fuel Standard,” Wagner says.
This has not been lost on renewable energy markets. “The worst-hit sector has been sustainable aviation fuel,” Wagner adds. “Biofuels, once a cornerstone of ag markets, are clearly not the administration’s priority.”
Commodities on the Retreat
Managed money has pulled back sharply from commodity markets, with speculators fleeing amid low returns and high volatility. “Historically, commodities have been a poor investment vehicle,” Wagner notes. “Without a compelling growth story, investors are parking their money elsewhere.”
Soybean meal, for example, has hit record net short positions, indicating a lack of confidence in the sector.
“Farmers are now left in a precarious position,” says Wagner. “They’ve slashed costs across machinery, fertilizers, and chemicals. But seed, being non-discretionary, remains a sticking point. It’s the one input you can’t compromise on if you want to grow a crop.”
A Tale of Two Models
Wagner draws attention to a divergence in agricultural strategies between the U.S. and Canada. “The U.S. has doubled down on the commodity model, leaning heavily on monoculture systems and markets like China. But China’s growth story is slowing. Meanwhile, Canada has embraced crop diversification, and the results are telling.”
He points to data showing Canada’s more varied crop mix leading to higher revenue growth compared to the U.S. “Since the mid-1990s, Canada has consistently outperformed the U.S. in revenue growth. Diversification, especially with resilient crops like pulses, has been a key driver,” Wagner says.
The Path Ahead
As farmers grapple with tightening margins, Wagner foresees increased borrowing. “We’ve already seen a 12% year-on-year rise in operating lines of credit in the U.S.,” he notes. “And with commodity prices in a downturn, this trend is likely to accelerate.”
For U.S. agriculture to thrive in the long term, Wagner argues, it must adapt. “The commodity model worked well when China was booming and biofuels were ascendant. But those days are fading. American farmers need to look to Canada’s example of diversification if they want to remain competitive.”
The post How Trump’s Presidency Could Reshape Commodities and Farm Economics appeared first on Seed World.