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Posted October 6, 2025 at 12:16 pm
U.S. farmers are facing a third straight year of losses — and with China pulling back on grain imports, President Trump’s proposed $10 billion in farm aid could be the next big political play. But can checks in the mailbox really replace lost markets — or is this just a short-term fix for a long-term trade war?
The following is a summary of a live audio recording and may contain errors in spelling or grammar. Although IBKR has edited for clarity no material changes have been made.
Welcome to this podcast. My guest today is Dan Basse of Ag Resource in Chicago. Welcome back to the program, Dan. How are you?
I’m very well — very warm weather here in Chicago. Harvest has been moving fast, Andrew. All good, at least for now.
I get the impression that certainly in New England here, the fall is a few weeks behind. I don’t know what’s going on. I take a picture of my neighbor’s trees every year in the middle of September when they start turning beautiful, blazing red, and here we are, 3rd of October, and they’re still fairly much green. So I dunno what’s going on with the weather, but..
We’ll leave that to another podcast, but I tell you what, I don’t remember many times in my career that I’ve harvested grain — and I was out on my farm last weekend — and it’s 80 degrees. It’s really unprecedented to be this warm harvesting grain in shorts and a t-shirt. So anyway, we’ll leave it at that.
So Dan, U.S. grain farmers are struggling with the third year of losses. What are the prospects then for the 2025 grain harvest?
Yeah, the harvest looks to be really good, Andrew. We’re gonna have a record corn crop this year, so we’re thinking somewhere in the vicinity of 16 and a half billion bushels. That’s more than all of the corn supply of last year. So it’s a bin buster, largely because farmers planted more acres. We planted the most U.S. corn acres this year since 1933. Corn farmers — our farmers — really embraced corn, if you will, and we planted 180 million acres of corn and soybeans combined. But this is a big corn harvest. Weather was good up until about the middle of August, and then it got dry on us, and we ended up being very dry into the middle of September. So with that in mind, the corn’s coming off a little less in yield than expected. Soybeans — quite strong — but the seed moisture when we’re combining them is quite low. We have to be very careful in combining that so some kind of internal fire doesn’t happen in our combines — it’s really a safety issue for the U.S. farmer. But a big crop — that’s what the farmer can count on this year.
Lots and lots of trade negotiations around the world have been going on. China and soybeans are in the news. Why is China avoiding U.S. soybeans, and what needs to happen to return China as an active buyer and importer of U.S. beans?
Yeah, it’s — the U.S. farmer is ensnarled, if I can use that word, in terms of the trade negotiations. Back in February, when U.S. President Trump put tariffs on fentanyl — if you remember, the fentanyl tariffs of 20% — the Chinese retaliated with 34% of their own tariffs on soybeans and U.S. grains. And so today, what has happened is that the Chinese have been able to buy most of their needs through Brazil and Argentina. Last week, of course, Argentina did a dollar swap, if you will, relative to the peso, and did $7 billion of grain sales with their farmers, reducing the export tax to zero. And so the Chinese now have been able to buy what they need through the end of November, first part of December.
And again, U.S. corn and soybean prices are a long way away from working into China. They’re not nearly close. But more importantly, I’m hearing from my Chinese clients that they’ve been told not to buy U.S. grains. China sees this as a negotiating lever for them. And I think this even goes back longer than that. The U.S. farmers are struggling because of fertilizer prices — you’re gonna hear a lot of talk about fertilizer prices being high. A year and a half ago, back in early ’24, China started to diminish their exports of phosphate — a key ingredient in crop production. By doing so, world phosphate prices have rallied about 40%. China accounts for 40% of the world phosphate market.
So this probably is a longer-term structural plan from China to get at the roots of the Trump administration’s core supporters — which are U.S. farmers.
And it’s also my understanding, Dan, that the supply chain between Brazil and China is really being beefed up.
Well, it has been. I would mention that because of what’s called the investment in the Northern Arc — this is along the Amazon River — Brazil is now a larger and more efficient exporter than the United States. We’re using a lock and dam system that goes back to the 1930s.
Brazil has invested billions, mostly private but also some public, that has really increased their availability of port facilities to load and execute grain cargoes. There are no delays of any size or substance anymore in Brazil. It used to be, five years ago, a vessel would wait 30 or 40 days to load a cargo of soybeans or corn. In Brazil today, that load-out time is one to five days. And so they’ve stepped it up. They’re able to meet world demand. They are the world’s largest soybean and corn exporters most years, and we expect that to continue. And that’s part of the financial pinch, if you will, on the U.S. farmer.
Do you think that China would be buying this amount from Brazil were it not for the political situation — for the trade negotiations?
I do believe that the structure of Brazilian exports was going to be lengthening. In other words, Brazil used to export beans from, let’s call it, the middle of February into the middle of September or October. Because of the size of the Brazilian crop now being 171–172 this year, 180 maybe next year, Brazil can export soybeans into November and December. So they’re dramatically cutting into the U.S. position. This is causing more competition in the world market between Brazil and the U.S. farmer. And because of that’s price, it’s lowering the price structure and causing some of the financial pain also for the U.S. farmer.
So what needs to happen to alter the prevailing bearish price trend?
We need to find new demand drivers. We need to find something like — if you remember back to the mid-2000s — we found the biofuels, and biofuels consumed a lot of grain. We then had the arrival of China as being a significant exporter on the world market, and that lifted grain values and gave farmers unprecedented profitability. Both are termed as demand drivers. Maybe India someday will come forward as being a population — which is exceeding 1.4 billion people — that will come forward and be bigger grain importers at some point. But we think it’s probably a decade away.
And the Chinese, for right now, it looks like they’re mature. They’re going to be importing about the same amount of corn and soybeans and wheat for many years to come. So it’s no longer a growth market for world agriculture.
So somehow I need either for biofuels — and maybe that’s environmentally friendly marine fuel or sustainable aviation fuel — something’s got to come to the fore that would be a demand driver that would change the bearishness that currently exists today. We don’t see it, but we’re always hopeful that with low prices and maybe low costs of things like ethanol and renewable diesel, these things will grow and have new sprouts for bigger demand going forward.
Dan, in the news I’m reading that President Trump is toying with the idea of $10 billion in subsidies or aid to farmers on account of the protracted negotiations with China and the loss of demand and low prices. How will U.S. farmers react to that should it happen?
I think every farmer would tell you they’d rather have markets than aid. I think that’s the first place we’ll start in this discussion. But if you think longer term, I do believe that the aid is needed and will be accepted by the U.S. farmer.
There’s an old — sorry — joke going around right now that the best way to double farm income is to have two mailboxes, because the checks will be coming. But that being said, Andrew, as you think about why we’re here, this all goes back to what I call a math equation: fentanyl. The tariffs that were put on in February are 20% — that will collect about $90 billion for the U.S. Treasury. So Trump will be handing out maybe $10 billion or a little more of that to the U.S. farmer. It’s a trade that he’s probably willing to stay with. But the problem for the U.S. farmer is that ultimately, we’d like to have a market. China’s one of our key grain markets, accounting for roughly 48% of U.S. soybean exports. So to lose them on a longer-term basis would be very devastating, and although the checks could keep coming, it’s not sustainable. I don’t think the taxpayer is going to be willing to keep funding the U.S. farmer for years and years down the road.
I think, Dan, since we last had you on in an episode on the IBKR Podcast, you’ve become a research provider on the Interactive Brokers platform. So that’s great news for anybody who wants to subscribe and take a look at your analysis.
It is. We try to break down markets daily and see where the risks and opportunities are within the markets. We’ve been doing this for 37 years, Andrew, so I hope we can provide some benefit to the InteractiveBrokers.com community and lead them in the path of agriculture that we think is very exciting and has opportunities both in terms of risk and profitability longer term.
Brilliant. Dan, thank you very much for taking the time out of your day to join me for this episode.
Always good to be with you, Andrew. Have a great day.
Thank you. And to the audience, that’s Dan Basse of Ag Resource over towards Chicago. Thanks for joining me and have a great weekend. Bye.
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Dan Basse dodged the yes/no question, “Do you think that China would be buying this amount from Brazil were it not for the political situation — for the trade negotiations?” Then, it’s a no? What do farmers do with the crops that are unsold? They just rot? Too bad there’s no program where the US can aid people by sending this food to them. Can the US taxpayer get lower prices since taxes are subsidizing their business or is keeping the prices high also part of this subsidy to maintain their profits?