China continues to wrestle with its economy, adding stimulus measures to stave off the aftereffects of a real estate crisis a few years ago. But as a major corn and soybean consumer, it's keeping prices in limbo. A potential trade war could add additional intrigue.
Additionally, it's not just agricultural commodities that are waiting to see if China's plans to revive its economy can boost demand. The whole commodities market is wondering if the second largest economy can work out its issues and reinvigorate growth.
"Global commodities markets are stuck in a holding pattern after China’s latest effort to revive its economy focused on the much-needed restructuring of local government debt, but stopped short of stimulus measures that would directly boost domestic demand," Bloomberg reported.
China's government has taken steps to bolster its economy with stimulus measures. But capital markets continue to wonder whether it's enough.
“It’s been a case of another hotly anticipated fiscal announcement from China, and another disappointment for those expecting substantial stimulus,” wrote Hamad Hussain, a commodities economist at Capital Economics Ltd.
Tariff Headwinds Coming?
President-elect Donald Trump's returning to the White House in 2025 could provide some additional headwinds for corn and soybean prices. A repeat of trade wars with China could ensue next year, but to the detriment of U.S. farmers.
"China is the biggest market for U.S. soybean exports and a major buyer of corn," Barron's explained. "As Beijing shifted its purchases to other producing countries like Brazil and Argentina, many American farmers suffered from plummeting sales."
On a positive note, other countries could receive corn and soybean exports from the U.S. Whether global demand is enough to offset less demand from China remains to be seen.
In the meantime, investors can diversify their portfolios with agricultural commodities. For corn and soybean specifically, investors can turn to the Teucrium Corn Fund (CORN) and the Teucrium Soybean Fund (SOYB).
Investors who want a broader approach can consider the Teucrium Agricultural Fund (TAGS). The fund combines exposure to Teucrium funds focused on corn, wheat, soybeans, and sugar for an even more diversified approach.
S&P Global delved deeper into what the ag commodities market could look like in 2025 with a new presidential administration on the way. Their research team reiterated the impact of China and potential trade wars that could ignite. But this spark could be positive, prioritizing U.S. producers, boosting ethanol production, tax cuts, and other plans could boost ag commodities as well.
For more news, information, and analysis, visit the Commodities Channel.
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