Wheat futures closed lower across all three major U.S. exchanges, with the May 2025 CBOT wheat contract settling at $5.36 ¾ per bushel, down 11 cents on the day. The market suffered from mounting trade tensions, with China imposing a 15% tariff on U.S. wheat imports, effectively shutting out American supplies. In addition, EU wheat exports have fallen sharply year-over-year, highlighting weaker international demand. The global supply outlook remains strong, particularly with Australia revising its 2024/25 wheat production forecast up to 34.1 million metric tons, a 31% increase from the prior season.

Corn futures continued their downward trajectory, with the May 2025 contract closing at $4.51 ½ per bushel, a decline of 4 ¾ cents. The market struggled under the weight of new tariffs, with China imposing a 15% import duty on U.S. corn, effectively blocking American supplies from one of its key potential buyers. At the same time, Mexico and Canada responded to the 25% U.S. tariff by issuing countermeasures, adding further uncertainty to North American trade flows. U.S. ethanol production also declined, with 457.4 million bushels of corn used for ethanol in January, down 4.6% month-over-month, reflecting weaker biofuel demand.

Soybean futures also ended the session lower, with the May 2025 contract settling at $9.99 per bushel, a drop of 12 ½ cents. China took a more aggressive stance in its trade retaliation, suspending imports from three U.S. soybean exporters while adding a 10% tariff on American soybeans. These measures exacerbated concerns over declining U.S. soybean exports, as Brazil’s harvest is already 50% complete and continues to dominate global supply channels. Meanwhile, USDA reported a private export sale of 20,000 metric tons of soybean oil to an unknown buyer, though overall sentiment remained bearish as China redirected its purchases to South America.

Key Market Developments and Global Trade Trends

The intensifying U.S.-China trade war continued to dominate market sentiment. Beijing retaliated against Washington's latest 10% tariff hike on Chinese goods by imposing 10%-15% duties on key U.S. agricultural exports, including wheat, corn, and soybeans. These measures, coupled with China restricting U.S. firms from certain investments, further complicated trade negotiations and increased volatility in commodity markets.

Meanwhile, Russia's wheat export forecast was revised downward by 500,000 metric tons to 42.5 million metric tons, citing logistical constraints and currency fluctuations. Despite this adjustment, Black Sea wheat supply remains abundant, keeping U.S. wheat at a competitive disadvantage. Similarly, Ukraine’s grain exports have slightly declined year-over-year but continue to flow steadily into global markets.

Weather remains a crucial market factor, particularly in South America. Argentina is facing heavy rainfall and potential flooding, which could disrupt corn and soybean harvesting and impact global supply chains. In contrast, Brazil continues to battle severe drought conditions, especially in southeastern regions, raising concerns over second-crop safrinha corn production. Forecasts suggest that dry conditions could persist into mid-March, exacerbating supply risks.

In the U.S., weather patterns remain mixed. The Northern Plains remain dry, raising concerns over early-season drought conditions for spring wheat and corn planting. The Midwest is preparing for a major storm system later this week, which could bring widespread precipitation, including heavy snow in northwestern regions. Meanwhile, the Central and Southern Plains received beneficial rainfall, offering relief to winter wheat crops.

Logistical disruptions are also weighing on grain markets. U.S. barge shipments along the Mississippi River have slowed significantly, with corn shipments down 41% and soybean shipments down 38.2% week-over-week. Additionally, Argentina’s oilseed workers' union is threatening to strike, which could severely disrupt soymeal and soyoil exports, adding further uncertainty to global supply chains.

The biofuel sector is playing an increasing role in shaping market dynamics. U.S. ethanol stocks rose 5.2% to 27.57 million barrels, raising concerns over a potential supply glut. The Biden administration is expected to review biofuel mandates, which could directly impact demand for corn-based ethanol and soybean oil for biodiesel production. Meanwhile, Brazil is considering reducing import taxes on corn ethanol, a move designed to strengthen trade relations with the U.S. while addressing domestic fuel price concerns.

Macroeconomic conditions are further complicating grain market outlooks. The U.S. Dollar Index remains weak, making American grain exports more competitive globally. However, persistent inflation concerns and the Federal Reserve’s stance on high interest rates are adding pressure to market sentiment. Crude oil prices stabilized around $70 per barrel, influencing both biofuel margins and transportation costs for agricultural goods.

Export trends highlight ongoing challenges for U.S. agricultural trade. U.S. wheat shipments showed minor improvements but remain unable to compete with Black Sea and Australian supplies. Meanwhile, France’s wheat exports have slightly strengthened, though global competition continues to weigh on prices. China’s demand for U.S. corn and soybeans has slowed, with Brazil emerging as the dominant supplier for both crops, further pressuring U.S. export prospects.

Investor sentiment remains cautious, with managed money funds continuing to reduce long positions in wheat, corn, and soybeans. Traders are now closely watching the upcoming USDA WASDE report and Prospective Plantings report, both of which are expected to provide further direction for grain prices.

The global grain market remains highly volatile amid escalating trade tensions, weather-related supply risks, and logistical disruptions. With China imposing additional tariffs on U.S. agricultural goods, South American production ramping up, and global demand trends shifting, traders are bracing for heightened market fluctuations in the coming weeks. All eyes will now turn to U.S. trade policies, South American harvest progress, and upcoming government reports as key factors influencing price movements in the near term.