As the new year kicks off, the grain sector faces the same old questions of, what, when and how much to plant in the coming cropping year. This year, RaboResearch analyst Vitor Pistoia said the challenging decision-making process has been turbocharged by a likely new cycle of trade wars, which are expected to bring volatility – again – to the global grain and oilseeds market.

Mr Pistoia said there are a lot of possible international trade tariffs on the horizon and their frameworks are still unknown. “The looming trade war is no longer just about the US versus China, but rather it has the potential to be the US versus any country. In the coming months, the global grains market may face hurdles and trade disruptions never experienced before,” he said. “And, the ongoing war in the Black Sea, uncertainty about local interest rate movements, the strengthening of the US dollar and usual weather oscillations cannot be forgotten about.”

The Rabobank analyst said the global trade unknowns can have a big impact on supply and demand, and importantly prices.

For wheat, Mr Pistoia said the global stock-to-use ratio (how much grain is left at the end of the year in relation to demand) has dropped for the seventh consecutive season and is now not far from the lowest level in the last 30 years, which was in 2007/2008 of about 18 per cent. “The last 30 years’ median for wheat stock-to-use is 23 per cent. To illustrate how important this is, by early January 2007 the CBOT wheat price was around the USD 5.0/bushel level and by early January 2008 it was around USD 9.0/bushel,” he said. “A catalyst type factor is needed to correct the market’s current bearishness after a strong North American harvest and consistently hefty Russian exports. One possible factor could be a poor EU crop or even poor Russian and Ukrainian crops. And the northern hemisphere weather in the coming months, especially through April and May, will be critical in setting expectations for higher wheat prices.”

Mr Pistoia said for canola markets, the outlook for Australian exports is clearer – with fewer unknowns in relation to the price trajectory. “For the black oilseed, the question is more about how high the prices can go and at which point in 2025 the EU crop will have an impact on prices. Based on early projections for the European crop and using historical average yields, the EU bloc could produce 19.1million tonnes of canola this year,” he said. “Resulting in at least a five million tonne deficit. With low expectations that the duties imposed on Russia and Belarus oilseeds being scrapped – EU crushers would need to tap into Ukrainian and Australian stocks to access non-GM canola and balance out how many GM seeds would be imported from Canada.” Mr Pistoia said from early October 2024 canola prices have improved in the face of such import necessity. “The Euronext canola prices, which is the European price reference for canola, has risen 16.6 per cent and the Australian non-GM average by 14.2 per cent to AUD 795/tonne. Conversely, due to the good crop in Canada and still robust carryover, Australian GM canola has improved only by 6.2 per cent to AUD 668/tonne for the same period. This large price difference between GM and non-GM canola is expected to remain in place.”

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