Long-sought markets hold potential for US agriculture
Removing barriers to US exports is a stated goal of the Trump administration, yet new markets could open should trading partners respond to tariffs by lowering, rather than raising, impediments. The EU, Japan, Canada and India are large export markets historically targeted by US agricultural-trade advocates. These appear to have relatively fewer substantial geopolitical disputes with the US and could significantly boost American imports. China holds huge potential, as evidenced by its increased soybean imports during a 2020 detente, yet the landscape is now complicated by myriad issues.
Initial reactions by Bangladesh, among the hardest hit under the new US trade regime, show that some partners may be willing to break rank and reduce barriers. Rising incomes have driven the USDA to highlight this market’s potential.
Agriculture-chain stocks lag, yet valuations hint at trough
Earnings along the agriculture chain remain squeezed as large crops keep a lid on prices. Yet improvements in upstream valuations suggest 2025 may increasingly be viewed as a cyclical bottom. Weak consumer spending is limiting margin gains downstream, extending the overall valuation discount.
Ag shares mixed by volatile policy, crop prices
Volatile policy and corn prices are scrambling a long slide in the Bloomberg Intelligence upstream agriculture peer group against downstream peers, which followed weaker crop prices and farm profits. Both upstream and downstream indexes have trailed equities for 12 months, with the MSCI All Country World Index up 8% vs. last year, and corn prices (until recently up 20%) now just 7% higher. Equities have risen among downstream sellers of protein (Pilgrim’s Pride, JBS) and food (Marfrig, Cal-Maine). Downstream performance is restrained by weak consumer demand and a volatile policy facing biofuels producers (Neste, Verbio).
Year to date, upstream producers are up 5% vs. a 7% gain for downstream. Shares have begun climbing among upstream players that sell chemicals (Nutrien, Corteva) and equipment (Deere, CNH) to farmers.