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

RaboResearch general manager, Stefan Vogel said that for Australian agriculture broadly, the most immediate effect may result from a new Trump administration’s impact on currency and, over the coming months, potentially trade.

“With the strengthening US dollar that we have already seen as a result of the Trump victory, the resultant softening in the Australian dollar is a positive for Australian agricultural exporters,” he said.

“Conversely, however, it serves to make farm inputs – including fertiliser, agrochemicals, fuel, and equipment – which are largely imported, more costly to purchase.

“Longer term, the knock-on economic benefits may not be as advantageous, as the bigger-spending policies that 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 other major economies as well.”

Mr Vogel said that the risk of a re-escalation of global trade wars was also a factor for Australia’s agricultural sector to monitor.

“While some of our commodities – including Australian canola – benefited from these trade wars and the halt 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 negatively impacting our exports, as we saw with the tariffs placed on Australian barley, wine, beef, and seafood by China,” he said.

Mr Vogel said impacts on Australia’s direct agricultural exports to the US – including beef – would hopefully be limited.

“Beef might not take centre stage in the economic reasoning of an industrial policy by Trump to protect US producers, especially 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 several of Australia’s agricultural commodities, particularly grains and oilseeds.

Grains and Oilseeds

FOR Australia’s grains and oilseeds (G&O) sector, the commentary stated that impacts would most likely arise from US policy approaches concerning the Russia-Ukraine War, energy, and the Middle East.

RaboResearch grains and oilseeds analyst, Vitor Pistoia said that if the new US government withdrew 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 recently seen them do with Egypt,” he said.

“So, volatility would be almost certain.”

Mr Pistoia noted that Ukraine has been a key grain supplier to the world, and restrictions on 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 said 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 recent years have been key to supporting 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 that, given international markets will enter 2025 with corn stocks that are “flat” year-on-year and soybean stocks building globally, “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 as well as 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,” Mr Pistoia said.

“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 higher crude oil prices provide price support for G&O – chiefly oilseeds – as biofuels generally become more expensive, it also leads to higher energy prices, making farm inputs more costly at the same time.”

Beef and Lamb

BY way of comment, The Spectator points out that the outlook for trade in meat is, to say the least, complex.

Having a trade imbalance that favours the USA, there is reasonable hope that Australian meat will not be significantly penalised by the incoming US government.

On the other hand, concerns about inflation have been voiced by numerous economic commentators.

If these prove to be well-founded, heralding recessions in America, China, or elsewhere, the general level of demand for meat may be subdued.

A countervailing factor to the threat of inflation is the weakness of the Australian dollar against its US counterpart.

The Australian dollar is currently about 1.5 per cent lower against the US dollar’s level on election day (November 5) having been down by as much as 2.85 per cent about a week ago.

This makes Australian beef and lamb relatively cheap – unless, of course, they are subjected to punitive tariffs.

It should be stressed that a sizeable portion of Australia’s meat exports goes to destinations other than the USA and China, as the table showing production and exports of beef, lamb, and mutton attests.

Perhaps the greatest concern is the outlook for China, whose troubled economy may be further impacted by the 60 per cent tariffs proposed by Mr Trump.

This might put meat in the same metaphorical boat as iron ore – a leaky one.