Managed money traders are looking at grains as a value buy!
By Aleah Harle, Farms.com Risk Management Intern
The insert content
Grappling with ongoing volatility, grain markets are demanding close attention to global demand indicators. Grain markets are currently being driven by tight supply dynamics in some cases (corn and canola), weather patterns, on and off trade policies, and strong exports, which have traded with resilience approaching February highs (corn and canola) than many would have predicted, despite an escalating U.S. trade war with the world.
In contrast, the stock market has performed much worse with major indexes like the DOW, S&P 500, and NASDAQ recovering from the early April lows in bear market territory down 20 percent from the early December 2024 high after the April 9th 90-day pause on reciprocal tariffs, but, after a brief dead cat bounce, stocks have since resumed the downside.
The uncertainty has hit lows not seen since the early days of the COVID-19 pandemic, as tariff uncertainty continues to weigh heavily on investors. But it’s not just the tariffs themselves that are driving the decline - it's the scale, unpredictability, and the broader economic risks they bring.
Trump’s attacks on U.S. Federal Reserve Chair Jerome Powell, stating he is “not happy” with Powell’s decisions regarding interest rates (not being proactive enough) and wants to replace him is adding to investor concerns.
Rising costs for businesses, shrinking profit margins, weaker consumer spending, and retaliatory measures from trade partners are all adding to the pressure and fueling the market’s downtrend.
With the U.S. dollar plunging to a three-year low and gold soaring to a record $3,382 per ounce, it’s clear that investors are rushing to safe-haven assets to shield themselves from the growing risks of economic fallout like a 2026 global recession.
Grain markets have outperformed stocks during this period, likely due to optimism that the trade war will garner some trade deals with talk of “90 trade deals in 90 days” helping ease some of the volatility seen at the start of the conflict.
However, the Trump administration needs to provide proof of any trade deals soon or stocks will fall to new lows the longer trade deals take.
Recent strong export data, especially for corn and canola have also supported this strength in futures. Exports for the 2024/25 season are projected to be the second highest on record, following last year’s bumper U.S. corn crop and more than double for canola exports. This momentum is helping to fuel a more positive outlook for the agricultural sector, especially when compared to the turbulence weighing down broader stock markets.
The obstacles to quickly resolving the trade war are as simple as Trump releasing his non-tariff list. Countries like Japan are saying that Trump is always asking for more.
Even if new agreements are signed, replacing China – the U.S.’s third-largest trading partner – is a huge challenge. While there is currently a 90-day tariff pause with some countries, key levies - like 10% universal tariffs and duties on steel, aluminum, and autos - remain while tariffs on Chinese goods have jumped to 245%, with China retaliating at 125%.
In 2024, total goods traded between the U.S. and China reached an estimated $582.4 billion. Now, with China refusing to come to the negotiating table and actively retaliating against nations cooperating with the U.S., finding alternative markets to make up for that volume will not be easy.
While countries like Mexico, Japan, and India, which are all in trade discussions, could help offset some of the lost trade volume from China, the longer these deals are delayed, the more disappointed markets are likely to become. Although funds have recently shifted back into some net long grain positions, this could be driven more by seasonal factors and weather conditions than by any real optimism about these nations cooperating with the U.S.
Ultimately, the grain markets are benefiting from exports and supply dynamics, which provide a stronger foundation amid the uncertainty with Trump’s tariffs. The stock market, on the other hand, is weighed down by broader macroeconomic concerns that investors are struggling to price in.
As long as trade tensions and economic risks remain unresolved, the stock market may continue to face challenges, while grains -- with more defined demand and supply drivers -- are likely to show more stability.
The big uncertainty remains: what happens after a 90-day pause? Large multinational S & P 500 companies will be very hesitant to provide full guidance and plan ahead with spending when the end game remains unclear.
Managed money traders are looking at grains as a value buy especially if the stock market continues to see pressure and U.S. tariffs end up causing inflation to rise.
For daily information and updates on agriculture commodity marketing and price risk management for North American farmers, producers, and agribusiness visit the Farms.com Risk Management Website to subscribe to the program.