Navigating Tariff Volatility: A Guide for Grain Merchandisers

In 2025, tariffs have emerged as a critical issue for agribusinesses and farmers, fundamentally reshaping the landscape of global grain trade and presenting unprecedented challenges for grain merchandisers. Trade policy shake-ups have become a major factor in our industry, creating both challenges and opportunities. If you’ve been feeling like the rules of the game keep changing, you’re not alone. It’s a complex situation, but one that can be managed with the right insights.

This guide aims to provide helpful insights and strategies to assist you in mitigating the impacts of tariffs, recognizing that while we can’t eliminate their effects entirely, we can work together to navigate these challenging times. We’ve gathered insights on the topic from industry experts, including our own Rhett Montgomery, DTN Lead Market Analyst. We’ve analyzed market trends to bring you practical strategies for dealing with tariff-related uncertainties. Whether you’re a veteran trader or new to the grain game, you’ll find valuable information to help you make informed decisions.

We’ll be exploring both the short-term reactions and long-term impacts of tariffs on our industry. Our goal is to equip you with the knowledge and tools you need to adapt and thrive, even when the market feels unpredictable. So, let’s roll up our sleeves and dig into the details of navigating tariff volatility in today’s global agricultural marketplace.

Short-term vs. Long-term Impacts of Tariffs

When new tariffs are announced or existing ones are modified, the immediate market reaction can be dramatic. However, it’s essential to distinguish between these short-term price swings and the longer-term structural changes that may occur in response to sustained tariff policies.

Short-term Impacts:

Rapid price movements: Futures markets often react swiftly to tariff announcements, with prices potentially moving several percentage points in a matter of days.
Increased volatility: Uncertainty around tariff policies can lead to heightened market fluctuations as traders adjust their positions.
Shifts in export flows: Immediate changes in buying patterns may occur as importers seek alternative sources for affected commodities.

Long-term Impacts:

Changes in planting decisions: Farmers may adjust their crop rotations or acreage allocations in response to sustained tariff pressures on certain commodities.
Development of new trade relationships: Countries affected by tariffs may seek out new trading partners, potentially altering long-standing global trade patterns.
Investments in domestic processing: Some countries may increase investments in domestic processing capabilities to reduce reliance on imports of finished products.
Shifts in competitive advantage: Sustained tariffs can alter the relative competitiveness of different origins in the global marketplace.

As Rhett Montgomery notes: “I don’t think that the tariff and trade war going on currently will have that much of an impact on the immediate outlook for ag commodities, particularly soybeans. The longer-term outlook gets murkier and more concerning as the U.S. is still undeniably reliant on China from an export standpoint for soybeans.”

Key Factors for Grain Merchandisers to Monitor

In the face of tariff-related volatility, grain merchandisers must develop a comprehensive approach to market analysis. This involves monitoring a diverse set of indicators that collectively provide a holistic view of market conditions. While no single factor can perfectly predict market movements, especially in an environment where tariffs could change daily, a careful examination of these key elements can offer valuable insights for decision-making. The following indicators represent critical areas of focus for grain merchandisers seeking to navigate the complex interplay between tariffs and market dynamics:

Futures Spreads

Futures spreads are perhaps the most critical metric for grain merchandisers to watch. As Montgomery explains, “Probably the single most important metric to use are futures spreads. Any merchandiser would agree that futures combined with your basis is bread and butter even more so than just your flat futures price.”

Spreads between nearby and deferred futures contracts can provide valuable insights into market expectations and storage incentives. In times of tariff uncertainty, these spreads may become more volatile and require closer monitoring.

Basis Levels

Local cash basis levels can be significantly impacted by tariffs, especially in export-dependent regions. Merchandisers should track how basis levels respond to tariff announcements and changes in trade flows.

Local Supply and Demand Dynamics

Understanding the supply and demand situation in your immediate area is crucial. Montgomery advises, “It requires a lot of focus on getting a grasp on what is produced in your backyard. What can you easily get your hands on and then weigh that versus what you thought the demand was.”

Global Trade Flows and Policy Developments

Keep an eye on global trade patterns. In fact, it doesn’t hurt to track overall movements in geopolitics and their impact on the grain industry. This may include monitoring:

Shifts in export destinations for major producing countries
Changes in import sources for key consuming nations
Development of new trade relationships
Key international agreements between existing and new partnerships

Strategies for Managing Tariff-Related Risks

Navigating tariff-related risks requires a multifaceted approach combining traditional grain merchandising principles with adaptive strategies. The following section outlines tactics designed to mitigate losses, capitalize on opportunities, and maintain operational flexibility amidst policy-driven market volatility. These strategies are complementary tools in a grain merchandiser’s risk management toolkit. By implementing a combination of these approaches, merchandisers can enhance their resilience to tariff-induced market shocks while positioning themselves to leverage potential advantages arising from shifts in global trade patterns.

Focus on Seasonal Market Tendencies

Even in times of tariff uncertainty, seasonal patterns often hold true. Montgomery suggests, “I would just lean back kind of on the seasonal tendencies of the of the market. You know, when in doubt kind of just go back to what it tends to do year in and year out.”

Balance Storage Decisions with Market Signals

Pay close attention to carry in the market and storage economics. Be cautious about holding grain for extended periods in inverted markets, even if local supply and demand factors seem supportive.

Diversify Market Opportunities

Don’t rely too heavily on any single export market. Look for opportunities to diversify your customer base, both domestically and internationally.

Utilize Risk Management Tools

Employ appropriate hedging strategies to manage price risk. This may include the use of futures, options, and other derivatives.

Stay Informed, But Don’t Overreact

While it’s important to stay updated on tariff-related news, avoid making knee-jerk reactions to every headline. As Montgomery notes, “You will see that the actual fundamentals behind the market tend to take precedence.”

Understanding Production Costs

In a tariff-volatile market, understanding production costs is essential for grain merchandisers. This knowledge must encompass both your operations and the economic realities of farmers in your network. A clear grasp of these costs enables better supply forecasting, enhances risk management, and helps identify regional opportunities or threats. Given that tariffs can affect input costs, staying informed about these changes allows for more agile merchandising decisions.

Impact on Input Costs

Tariffs can affect the cost of agricultural inputs such as fertilizers, machinery, and technology. For example, concerns about potential tariffs on Canadian potash highlight the interconnectedness of global supply chains in agriculture.

Calculating Break-even Points

Help farmers in your area understand their break-even points in light of potential tariff impacts. This can inform marketing decisions and help manage risk. By providing this valuable insight, you strengthen relationships with producers and gain a more accurate picture of potential supply in your region.

Adapting Procurement Strategies

As production costs shift due to tariffs, grain merchandisers may need to adjust their procurement strategies. This could involve diversifying sourcing regions, negotiating longer-term contracts to lock in prices, or exploring alternative commodities that may become more economically viable. Staying flexible and proactive in your approach to procurement can help mitigate the impact of tariff-induced cost changes on your operations.

Regional Considerations

The impact of tariffs on grain markets is far from uniform across different geographical areas. Understanding these regional variations is crucial to effectively navigate tariff-related challenges and opportunities. The following factors play a significant role in determining how this impacts specific regions:

Export Facility Proximity

Proximity to export facilities plays a crucial role, as regions closer to major ports or border crossings often experience more immediate and pronounced effects from tariff changes. Their local markets are more directly linked to international trade flows, making them more sensitive to policy shifts.

Export Market Dependence

Reliance on specific export markets is another critical consideration. Areas that have historically depended on select countries for exports may be more vulnerable to targeted tariffs. To mitigate this risk, diversification of export destinations can be an effective strategy for both producers and merchandisers in these regions.

Domestic Processing Capacity

The presence of domestic processing capacity can provide a buffer against export market disruptions. Regions with robust local processing industries may be better insulated from tariff impacts, as they have alternative outlets for their grain production. This local demand can help stabilize prices and provide more marketing options for farmers and merchandisers alike.

Crop Diversity and Rotation Patterns

Local crop mix and rotation patterns also influence a region’s resilience. The diversity of crops grown in an area can affect its ability to adapt to tariffs targeting specific commodities. Regions with more flexible rotation options may be better positioned to adjust to changing market conditions, allowing farmers to shift production.

Transportation Infrastructure

Transportation infrastructure is another key factor. The quality and capacity of local transportation networks can significantly impact a region’s ability to redirect grain flows in response to tariff-induced market shifts. Areas with well-developed and flexible transportation options may be better equipped to adapt to changing trade patterns.

Historical Trade Relationships

Lastly, historical trade relationships can play a role in how tariffs impact specific regions. Long-standing partnerships between certain areas and foreign buyers may lead to more resilient trade flows, even in the face of new tariffs. These established relationships can sometimes weather policy changes better than newer trade connections.

As industry expert Rhett Montgomery points out, “I think geographically you have a degree of impact. For example, Western Corn Belt soybean farmers are impacted to a heavier degree given their proximity to international trading capabilities.”

Grain merchandisers should conduct thorough analyses of these regional characteristics to better anticipate how tariff changes might affect local market dynamics. This informs more effective risk management strategies and helps identify those unique opportunities that may arise from shifting trade patterns.

The Role of Domestic Processing

Increased domestic processing capacity can help mitigate some tariff-related risks by providing additional local demand. Montgomery notes, “The good thing is that there are four to five new soybean crush plants between North Dakota, South Dakota, Iowa and Minnesota. That should help soften the blow.”

Consider how growth in local processing capacity might affect basis patterns and storage decisions in your area. New facilities can strengthen local basis levels, alter seasonal patterns and storage strategies. Balance these factors against processors’ forward contracting practices and your ability to capitalize on futures spreads. And always maintain relationships with local processors to understand their procurement strategies in the context of tariff-related market disruptions.

Adapting to Uncertainty

In today’s volatile trade environment, the ability to adapt to uncertainty has become a critical skill. Create strategies for maintaining agility and resilience in the face of rapidly changing tariff policies and market conditions.

Scenario Planning

Develop and regularly update a range of potential scenarios based on different tariff outcomes. This exercise helps identify potential risks and opportunities that may not be immediately apparent. By thinking through various possibilities, you can create contingency plans and be better prepared to act swiftly when changes occur.

Enhanced Market Intelligence

Invest in robust market intelligence capabilities. This may involve leveraging data analytics, subscribing to specialized trade policy reports, or cultivating relationships with industry experts. The goal is to gain a deeper understanding of the complex interplay between tariffs, global supply chains, and market dynamics.

Collaborative Partnerships

Foster collaborative partnerships with other industry players. In times of significant market disruption, there may be opportunities for cooperative efforts that can help mitigate risks or capitalize on new opportunities. This could involve joint logistics arrangements, information sharing, or even temporary trading partnerships.

Technology Adoption

Embrace technological solutions that can enhance your ability to respond to rapid market changes. This might include advanced trading tools, real-time data visualization platforms, or even blockchain-based supply chain tracking systems. These technologies can provide a competitive edge in processing information and executing trades.

Taming Tariffs

Navigating tariff volatility presents significant challenges for grain merchandisers, but it also creates opportunities for those who are well-prepared and adaptable. By focusing on key market indicators, employing sound risk management strategies, and staying informed about both local and global market dynamics, merchandisers can position themselves for success even in uncertain times.

Remember that while tariffs can cause significant short-term disruptions, fundamental supply and demand factors typically reassert themselves over time. By maintaining a balanced perspective and avoiding overreaction to day-to-day headlines, grain merchandisers can make more informed decisions and better serve their customers and communities.

As you adjust to volatile tariffs, consider partnering with DTN, a trusted name in agricultural intelligence. Our new DTN Grain Intelligence solution offers robust data, real-time market information, and expert analysis to help you make informed decisions and stay ahead of market shifts. Let DTN help you enhance your ability to adapt to changing conditions, manage risk, and capitalize on opportunities. Visit our website or speak with a representative today. With the right tools and partnerships, you can turn uncertainty into opportunity in today’s dynamic grain markets.