Rabobank Australia, Media Release, 7 November 2024

While the wider implications of a new US administration under President Trump for Australian agriculture will only become apparent over time, there are a number of key watch factors for the sector, particularly for grains and oilseeds, Rabobank says in newly-released commentary.

RaboResearch general manager Stefan Vogel says for Australian agriculture broadly, the most immediate effect may be felt as a result of a new Trump administration’s impact on currency and then, over the coming months, potentially in trade.

“With the strengthening US dollar that we have already initially seen as a result of the Trump victory, the resultant softening in the Australian dollar is a positive for Australian agricultural exporters. Though conversely, it serves to make farm inputs – including fertiliser, agrochemicals, fuel and equipment – which are largely imported, more costly to purchase,” he said.

“Longer term, the knock-on economic benefits may not be as beneficial, as the bigger-spending policies, which were part of Donald Trump’s campaign promises, risk fuelling US inflation and leading to a higher interest rate environment in the United States and potentially also other major economies.”

The risk, too, of a re-escalation of global trade wars seen in the first Trump administration is also a factor for Australia’s agricultural sector to watch, Mr Vogel said.

“While some of our commodities – including Australian canola – did benefit from these trade wars and the stop on China buying and importing US soybeans for an extended period during the last Trump term, there is also the downside risk of trade tensions spilling over to negatively impact our exports, as we saw with the tariffs that were placed on Australian barley, wine, beef and seafood by China,” he said.

Mr Vogel said impacts on Australia’s direct agricultural exports into the US – including for beef – will hopefully be limited. “Beef might not take centre stage in the economic reasoning of an industrial policy by Trump to protect US producers at a time when US cattle producer prices and retail beef prices are very high,” he said.

However broader US policies may have implications for a number of Australia’s agricultural commodities, particularly grains and oilseeds.

Grains and oilseeds

For Australia’s grains and oilseeds (G&O) sector, Rabobank says, the impacts would most likely come as a result of US policy approaches around the Russia-Ukraine War, energy and the Middle East.

RaboResearch grains and oilseeds analyst Vitor Pistoia says, if the new US government withdraws support for Ukraine in its war with Russia “and Ukraine capitulates”, this could see Russia with more farmland and therefore “more G&O and more relevance in the global market”.

“This may be bullish for prices in the short term, but will inevitably give Russia more power to negotiate bilateral deals, as we’ve seen them recently do with Egypt. So volatility would be almost certain,” he said.

Mr Pistoia noted that Ukraine is a key grain supplier to the world, and restrictions of its export flows would drive grain prices higher.

“For the 2024/25 season, Ukraine is forecast (by the US Department of Agriculture) to supply 7.4 per cent of global wheat exports, as well as nine per cent of global barley exports, 12 per cent of corn and 18.5 per cent of canola exports,” he said.

“And those volumes cannot easily be replaced by other nations, including other big exporters like Russia, which already has a 22.2 per cent share of global wheat exports, Australia with 9.5 per cent and the US with 10.4 per cent.”

In terms of energy policy, Mr Pistoia says, it will need to be established if Donald Trump’s “campaign mantra of ‘drill, baby, drill’ is for real”, as this will have implications for the G&O sector, through biofuel demand.

“The increases in US biofuel production in the past few years have been key to support G&O prices globally, and the IRA (Inflation Reduction Act) signed by Biden in 2022 gave more long-term visibility to invest in the sector,” he said. “Many proposed and under-construction US biofuel facilities might review their plans following Trump`s decisions, and this would be bearish for G&O demand,” he said.

Mr Pistoia said, given international markets will enter 2025 with corn stocks that are “flat” year on year and soybean stocks building up around the globe, “this is not a good combination for producer prices, especially for feed grains”.

Additionally, he said, the new US administration’s stance on the Middle East has the “very real” potential to impact crude oil prices, with implications for both grains and oilseeds and farm input prices.

“The market assumption has been that a new Trump administration will not move back on US support for Israel, and may even intensify it. By having a stronger footprint in the matter, potentially fuelling escalation, there is a substantial risk of this leading to a ‘boiling crude oil scenario’.

“While a scenario where there are higher crude oil prices provides price support for G&O, chiefly oilseeds, as biofuels generally will also get more expensive, it also leads to higher energy prices making farm inputs more expensive at the same time.”