Economist talks trade, biofuels, acreage, more

KANSAS CITY, Mo. — There were no changes in the U.S. corn and soybean balance sheets for the second straight month, despite expectations for higher corn exports and lower domestic soybean use.

With few revisions in the U.S. Department of Agriculture’s world supply and demand estimates report on March 11, Arlan Suderman, StoneX chief commodities economist, covered several other issues beyond just the numbers.

Do you think that USDA is having a hard time not increasing the exports of soybean, corn and wheat for 2024-2025 crop?

Suderman: Yeah. Due to the trade war, I think they’re having a hard time. USDA claimed in their opening page that they’re not assuming any tariffs that are not currently applied.

And since the Canada, Mexico tariffs are not applied before April 2, they did not include that. I have a hard time believing that. If that was the case, they should have jumped U.S. corn exports by at least 75 million bushels in this report.

Will this trade war, tariffs getting higher, liquidation in the stock market, deceleration of growth, impact the demand for grains?

Suderman: Generally, it should not or it should be minimal. The market will assume that it will, and in the markets, perception is reality. I think that’s one of the big reasons we’ve seen the liquidation we have. But you look at today’s report and it was really bearish for corn and soybeans.

Remember a month ago when we got the February report and we talked about on this webinar, the fact that the market was disappointed that USDA did not make the adjustment, so it sold off.

Today, it really didn’t. I think that’s because we’d already liquidated so many speculative positions. A lot of that has already been priced into the market.

For corn, is there a sufficient crush in ethanol production capacity to offset potential loss of exports due to tariffs?

Suderman: There is sufficient demand right now for the demand that we have. Now I’ve been asked about ethanol as a feedstock for aviation fuel, or I’ve even been asked what about if we get year-round E15 ethanol, which is something that Washington is working on right now and that’s going to take a lot of time. If you think about it, E15 is a 50% increase from E10, and, depending on the study, you get your most efficient use of car mileage and efficiency somewhere between E23 and E30.

Brazil’s at E28. I believe that they are somewhere in that ballpark. So, it would take a lot of time to ramp up that production. I think the industry would welcome that opportunity to do so.

Overall, I would say that we do have the capacity now for what we need, and we’re producing very close to current capacity. I do think we could expand a little bit more if we would start seeing increased production come online.

Given potential tariffs on Chinese used cooking oil in April and the Chinese tariffs on Canadian rapeseed oil, are U.S. biofuel producers likely to use rapeseed feedstocks over U.S. soybean oil, or will biofuel producers still favor UCO? What does the bullish outlook for soybean oil look like?

Suderman: Fifty-five percent of UCO comes from China, and I think the tariffs will shut that off. That’ll have them look into other feedstocks such as canola oil. We saw canola oil prices plummet with the tariffs that China put on Canada, but Canada won’t be able to come to the U.S. with it either if we put the tariffs on them.

People in this industry don’t know from day to day what they’re going to be using, and that’s just creating a tremendous number of question marks for the industry going forward. Now this is at a time when production is shut down, by about between 45% overall right now.

There’s a lot of moving parts right now. It does not look good for Chinese used cooking oil, does not look good for Canadian canola oil in the direction that we are currently moving.

What are your estimates of soybean export sales to China for the rest of the year?

Suderman: I think it’s going to be pretty limited. There were about 1.4 million metric tons, so about 55 million bushels are on the books as of the last report. We know about 400,000 metric tons of that is already on the water.

So, it leaves about 1 million metric tons, about 37 million bushels yet that China could cancel. They could still take it later this year. They could roll into next year.

I anticipate that we’ll see some cancellations. Now will that be a few cargos? Will that be all the 1 million metric tons or something in between?

But I do think that China will do a few cancellations at some point just to try to shake up the market. They do that from time to time. They’ve done that for years, in my opinion, to try to send a message.

Whether it will have a big impact on the balance sheet, I don’t think so. I think the bigger question is next marketing year. Keep in mind that this year’s Brazil crop is 168 million metric tons. That’s still up about 19 million metric tons from our estimate for last year, and if China bought a little over 22 million metric tons the past year, Brazil increased production by almost as much. So, that’s the direction we’re moving.

During the Agricultural Outlook Forum last month, USDA estimated 2025 corn acres at 93.6 million, up 3.4 million from last year, and 84 million soybean acres, 3.1 million lower than 2024. Do you agree with the corn and soybean acreage estimates from the Ag Forum?

Suderman: It kind of scares me how close their numbers were to mine because USDA didn’t do any surveying, and I’ve been saying all along I don’t trust the acreage numbers coming from USDA at the outlook forum because they haven’t surveyed anybody. They’ve just modeled it, and that usually doesn’t work very well.

We are collecting more data. We’re doing some things to collect data this week and hope to update my estimates. I anticipate that my estimates for corn will go up and soybeans will go down. I’m just trying to get enough data to determine by how much.

I don’t think we’ll lose as many soybean acres as what we gain on corn because I think in the southern Midwest and in the south there will be some areas where we actually increase soybean area.

I think we’re going to lose more cotton than most people think, and that cotton’s going to depending on where it’s at. Some will go to corn. Some will go to rice. Some will go to soybeans. Some will go to double-cropping soybeans and wheat. It’ll go to various options.

I do think we’ll see more corn in the northern plains. We’ll also see some more alternative crops up in that region. I think we’ll see more corn in Kansas, less grain sorghum by a significant amount.