Biofuels, Brazil, and the cost of war: Suderman outlines key forces shaping grain markets

Geopolitical drama and policy uncertainty are once again driving volatility across commodity markets, leaving farmers to interpret fast-moving signals that don’t always tell the full story. To unpack how to navigate war-influenced markets Shaun Haney speaks with Arlan Suderman of StoneX to discuss how global conflict, biofuel policy, and trade dynamics are shaping grain and oilseed markets. As the conflict involving Iran continues to evolve, Suderman says that market reactions are often more reflective of headlines than underlying fundamentals. “I think it surprised me how easily people are swayed by headlines,” says Suderman, noting that wartime information flows are often strategic and conflicting. “You have to learn in a wartime to take everything with a grain of salt in the context of what you observe.” That volatility was evident in energy markets, with crude oil swings spilling over into grains. Suderman points out that corn and wheat moved lower alongside oil, reinforcing the strong link between energy and commodity pricing. At the same time, attention is turning to U.S. biofuel policy, particularly the anticipated Renewable Volume Obligations (RVOs), which could provide support to soybean oil and canola markets. Beyond short-term drivers, Suderman highlights structural shifts in global trade. With Brazil maintaining a cost advantage in soybean production, the U.S. is increasingly focused on building domestic demand through biofuels. However, that strategy carries political risk. “As long as we’re not the low cost producer… any new markets that we create, we’re simply creating new markets for Brazil,” he says. For Canadian producers, currency dynamics, biofuel policy, and geopolitical risk are all converging to influence pricing opportunities. Staying grounded in fundamentals—while filtering out noise—remains critical in navigating today’s markets. Trending Welcome to this mid-week edition of RealAg Radio with your host Shaun Haney! On today’s show, Haney is presenting a conversation about innovation, food security and resilience: Tyler McCann and Elise Bigley of the Canadian Agri-Food Policy Institute (CAPI) co-host this conversation with Alison Sunstrum, the CEO of ConserveX. Plus, don't miss today's spotlight interview... Read more » Rhizozorb is redefining what growers expect from phosphate fertiliser. Backed by data and built for performance, Rhizozorb helps reduce phosphorus losses, improve uptake and boost ROI without increasing input costs. Join the next wave of growers switching to the next generation of phosphorus fertilisers by visiting phospholutions.com. Let's talk about what's going on in the markets. There's no shortage of things and how what's all impacting what's happening with commodity prices on the input side. But also, of course, when it comes to some of the commodities that we are growing in our fields are about to put into the ground. Joining us to break it all down, provide us with great insight is Arlan Suderman from Stonex. How are we doing today, Arlan? Good to be with you again, Shaun. You're right. There's a lot to talk about. You, you having fun yet? Oh, I am. You know, from a pure student of the markets, it is fun. I know it's very frustrating to both producers and end users. Though we are getting to like a month into the Iran war, what would be your biggest surprise and what like some of the reaction like from a, from a market perspective is, is there anything that's really like, oh, didn't see that. I don't know. From a market standpoint, I think it surprised me how easily people are swayed by headlines. When you get in a war, there's a lot of misleading stuff that's out there. There's a lot of, call it, I'd say it this way, both sides in any war, both sides are going to use the media to fight battles in two fronts, the battlefront and the public opinion front. And they're going to put information out there. And sometimes the information is meant to distract from another objective and sometimes it's actual truth. And you have to be able to discern from that. And the way people, the way people in the markets are simply swayed by the headlines this way or that way thinking is there no strategy or whatever? And I think that you have to learn in a wartime to take everything with a grain of salt in the context of what you observe and interpret it in that way. Hey, we're recording this on Monday afternoon. A great example is Monday morning where President Trump says, hey, five, five day delay here on these energy site bombings. We are going to negotiate. We're negotiating in the process of negotiating. And Tehran says, I don't know what you're talking about. We're not negotiating at all there's a really good example. Yeah, there is. And first of all, we'll look at it from the President Trump side. Are we talking, are we negotiating or is this a distraction for troop movement somewhere else? We've certainly seen times this over the past year when he had a conflict with a country and he would say one thing is a distraction to set the stage for being able to catch an opponent off guard somewhere else. That's one possibility. Looking at it from Iran standpoint, if they hope to survive, and I would anticipate they have the hope of surviving, then they cannot appear weak. They have to look like anything that happens was their idea or something that they drove in order to continue to sustain the support of their support base, whether that's Revolutionary Guard or whoever that may be. And so they might be negotiating, but not want anyone else to know. But you also likely have different factions within Iran and we may be negotiating with one faction and that faction may not, even the Iranian Guard may not know that they're negotiating type of a thing. So all of those are possibilities. And so there again, we simply have to say, okay, what do we observe happening? And it tells us, if nothing else, that we seem to be coming to some inflection point, that the end is probably closer rather than farther away, probably in the days and weeks ahead rather than the months ahead. Are the markets reacting then, as expected here? I would say so. We, of course, had the immediate reaction on Monday morning of seeing a total collapse of crude oil prices, stocks surging higher, treasury yields that had been higher at 8 and 9 month highs earlier overnight, falling, plummeting and then bouncing back. And then when Iran came out with its counter statement, we saw some type of a rebound on that of what, you know, if they were higher coming back, et cetera. So I think they're trying to generate all that or to try to digest all of that, so to speak. One thing is clear, as I had been saying, the grain and oil seeds, the rallying grain and oil seeds probably ends whenever the rally, crude oil ends. And I think we saw that really certainly play out particularly for corn and wheat when crude oil collapsed, corn and wheat did as well. Soybeans, though, do have another storey in the anticipated release of the RVO's, the blending requirements, etc. Later this week. And so that gave them a little bit of support in the midst of that pressure. Are you pretty confident we're going to see those 26, 27 RVO's this week? I am. Lee Zeldin, who's head of the EPA did come out again today and say it is going to happen by the end of March. So we fully expected that. But why would the White House have a big celebration of ag event on Friday, which is still on as of this moment as we're talking, if they didn't expect to have a major announcement to celebrate? So I fully expected on Friday, if it doesn't get leaked out before and obviously something that they at least believe will be very positive for farmers and for the biofuel producers, since that's who they invited to this event. Well, the president went to Iowa and he didn't. You know, we were expecting something around E15 and he kind of punted it, Arlan. So I really hope that that's not what happens on Friday. I really. You're right. Yeah. There was a lot of expectations when he came to Iowa that he would announce at that point, but that wasn't based on anything he said. In this case, the White House invited specifically biofuel producers and farmers and has talked about biofuels as a topic of discussion at the event. So you have a little bit more to go on there to suggest. And you know, if they knew they were going to do it by March 31, why wouldn't they move it up to March 27 when they had this big event? Because we know this administration loves to draw attention to themselves and that would certainly allow them to do that. E15, you know, the opportunity for access to a year round. If it does happen, does it have the market impacts as many have been kind of promising and hoping for? What are your thoughts on it? Yes and no. The biomass diesel impact should be fairly immediate once we get the RVO's as we see production really ramp up for the remainder of the year and into next year if it comes out anywhere close to what we anticipate. The one potential bearish surprise might be there because of inflationary gasoline prices, fuel prices right now. If they would say, oh, we're three months into the year, so this year's we're going to scale back, that would be a disappointment to the market. On the ethanol front, it's more of a long term benefit because it's not a mandatory, it's a voluntary saying we're going to allow it year round, allowing the infrastructure to get developed and that would allow that demand base to be built. I believe that would happen, but it wouldn't be as immediate for corn as what this RVO's will be for soybean oil, canola oil, et cetera. Speaking of canola that has been one of the better performing commodities in our entire North American commodity complex. Arlan. Yeah. And it goes back to the expectations of biofuel demand. And as we look at what we know so far from the 45Z, as well as the proposed regulations for the RVO's and everything, it looks like North American feedstocks should receive favourable treatment, and particularly with specific expectations or specific wording to try to cut out imported used cooking oil from China or outside of North America, I should say. And so it does look positive. Yes. Yeah. The Canola Council of Canada, the ccga, the Canola Growers of Canada, they've been talking a lot about this uco in the same way that the American Soybean association has been very much in step. And looking at that from a North American point point of view. Speaking of China, President Xi, President Trump, there's been pre negotiations in Paris. Will we see a spring meeting here between the two leaders? Yeah, I really believe we will. And I believe that the delay in the meeting has nothing to do with how the trade talks are going and everything to do with the President trying to manage a war day to day without having to deal with the security issues of being in Beijing, let alone the image issues of that. And so I do expect it to happen because I think President Xi needs this to happen because of internal things happening inside of China with the Communist Party. And I think President Trump needs this to happen as well. So I do expect it to happen. I don't expect another 8 million metric tonnes of soybeans to be involved in it for this current marketing year. I, from the start I felt like, you know, because Brazil soybeans are so much cheaper than US soybeans at this point delivered to China, any soybeans, just like the 12 million metric tonnes they've already bought, they'd have to be bought by Sino Grain, the state grain buyer, and then put in the reserve from where they could be auctioned off to crushers. But the reserves are full. And so I expected that they would offer an alternative of buying other commodities and that then it would be up to Trump how hard he pushed soybeans per se. And it looks to me like that's exactly how it's played out, that they've offered other commodities, non soybean commodities, and President Trump has not pushed him on the soybean side of it. And frankly, if he wants to help the farmers, most American farmers have sold their soybeans already, whereas they still own other commodities. They could benefit more if it's other commodities from that standpoint. So I think it makes some sense from that standpoint. It's a question of timing now and then what happens to the 25 million metric tonnes that are expected for next year. One of the interesting things is when you look at this, the Trump administration understands that relationship matters to China. And So during Trump 1.0, the negotiators talked with their counterparts in China daily, seven days a week. They had conversations with them, built relationship day in, day out. And then when the Biden administration came in, those communications got shut off. There was radio silence for four years between negotiating teams. And the Trump administration came back in and reached out to Chinese trade negotiators and it's who are you? So it had gone from a relationship business to transactional business and now they're trying to re. Establish a relationship. So when they're scheduled negotiations, know that those. There's communications going on on almost a daily basis. But those are the actual. Okay, now let's sit down and do the solid negotiating about what we've been talking about. So I do expect something to happen. It just probably won't involve soybeans or not much of it. Now, specific site or just I think it's Cargill in Brazil where China has said, I think it's foreign material. They've said, is that an indication of, hey, we're back on the American bean train, or what do we read into there? Yeah, the market initially interpreted as that, but I think in this case it was probably literally foreign material, or China periodically does things like this to try to knock the market and be able to buy something cheaper. And it may have simply been that China had asked Brazil's Ministry of Agriculture to tighten up inspections for what they said were weed seeds that aren't present in China. They didn't want those in the soybeans and some other foreign material. Maybe Brazil had gotten a little too comfortable with the doing business with China and not maybe cleaning things as well as they needed to or whatever, I don't know. But they have straightened out that problem. The beans are flowing once again and it looks like it's something from the past. Okay, well, the weed seed technique, as I'll call it, that's exactly what they did on Canadian canola the last time with, with two major exporters. And if I remember correctly, one of the weed seeds isn't even found in Canada. Just, you know. So this seems to be a bit of a pattern here and. But I guess it does speak to when the China business on Commodities is good and you're in the, you're in like the, you know, the circle of trust and love. You can do a lot of business but it doesn't mean you're going to stay there forever. So it's almost like a get it while it's hot kind of scenario for, for exporters, us, Canadian or others. Yeah, absolutely. And I think when it comes to soybeans, we are not. The United States is not the low cost producer in the world and that business is going away. I think the opportunity to sell soybeans near term to them is a good segue, so to speak, or bridge is a better word probably to our domestic demand base that we're building. The risk there is a biofuel programme does have a political component to it. So what if the next administration is not as favourable toward biofuels? That's a risk going forward. But I think if you can have domestic demand versus being dependent upon China, that's always good. But as long as we're not the low cost producer and part of that is currency exchange rates with our strong dollar versus the weak RIA in Brazil, any new markets that we create, we're simply creating new markets for Brazil. You know, I think back to the earlier winter months. A lot of speeches in the U.S. i always had somebody asking questions about currency. There's always some sort of currency nerd in the crowd. You know exactly who I'm talking about, Arlan. They're out there. And there was a lot of optimism from US farmers in the audience about the bearish US dollar because it was going to allow for more opportunity for exports. Now with the Iran war that has been kind of flipped on its head is all of a sudden the US dollar is back to being viewed as, hey, maybe this isn't going away as the world's reserve currency. How do you see it right now in the direction of the US dollar? I think the biggest problem with the US dollar right now is the euro. If you look at the global currency basket, the dollar cannot go down without the euro going up. But the European Union has enough economic problems that it's very difficult for the euro to go higher. And I think that's going to be the biggest obstacle of getting the US dollar weak enough to truly be able to compete with Brazil and other countries. Would it be a positive for US agriculture if that dollar was more bearish? Oh, absolutely, absolutely. It would help us compete. Yeah. I've been watching the Canadian. One of the things I talked about a lot is the Canadian dollar and does it, does it lose value to those European currencies as well and stay pegged to the US Dollar? Because it would really be a disadvantage for Canada if it appreciated versus the US Dollar. It would create some hardship. And you're agreeing with that too. So. Absolutely, yeah. Cave to wrap up things to watch out for here in the coming week. So I think the RVO announcement from the epa, we expect it to come on Friday of this week, certainly by the middle of next week, but Friday makes the most sense right now. That I think will be a significant market mover or at least to have that potential to be a market mover one way or the other. Our bias is positive, but we'll see. And then when, when do we see things really play out with Iran? President Trump is creating an expectation that it be within days. It would be foolish to create that expectation if he didn't know something that is going to happen to make it happen. He could really hurt his credibility by doing that. So I think the market is leaning in that way that we will see something and then see how that plays out for the commodities, be it energy prices and fertiliser prices especially. Yeah, we talked to Josh Linville from your shop quite a bit. And the fertiliser market is just absolutely wild. And one of the things that we've heard from Chicken Shapiro from Bespoke Group is the end of the Iran war as it sits is not necessarily on the same trajectory as the Strait of Hormuz reopening and being back to normal. Do you agree with that? It'll have a long tail. The first step is to get resolution and, and then to reopen the strait. But that's going to take some time. I am not in the camp that believe, believes that we're seeing much in the way of mining of this trait. But I do think that the drone risk is probably the most significant risk for ships going through there. And that's enough to create fear. And Iran would like to keep that fear in place as long as they possibly can. And insurance, there has to be the appear, you know, the perception of safety in order for those shippers to get insurance. That's one of the keys as well. Yeah. And I hear that insurance has pretty much been worked out. It's now more about just being able to physically get through. And Iran would like to charge ships to go through there as their revenue source since they're losing a lot of their other crude oil revenue. And so they would like to do that. Whether they're successful or not is going to be the key. United States would obviously like to get it right reopened without Iran getting that leverage. So they wouldn't have the revenue to start building their nuclear programme again and building other missile and military hardware that could be used against the West. Arlan, always love your insights and perspectives. You are so up to date by the minute on some of the stuff that's going on. So, hey, thanks a lot for joining us here at RealAg Radio. Thank you, Shaun. My pleasure. For the latest ag news, agronomic advice and more. Cheque out RealAgriculture.com and RealAg Radio.