Quarterly Outlook
Equity outlook: The high cost of global fragmentation for US portfolios
Charu Chanana
Chief Investment Strategist
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Agriculture markets diverge as trade war, weather, and speculators reshape landscape
Ole Hansen
Head of Commodity Strategy
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Key points:
- The Bloomberg Ag Subindex is up 3.2% YTD, during a turbulent period characterised by volatile weather conditions, a global trade war raising import barriers, and a weaker dollar.
- Several commodities have felt the brunt of these developments, with the biggest losses seen across the grains sector, led by wheat while tight supply have supported strong gains in coffee and cattle
- Speculators are currently holding net long positions across all three agricultural subsectors. The strongest bullish conviction is evident in live cattle, coffee, and soybean oil. On the bearish side, cotton, soybean meal, and particularly wheat stand out.
The Bloomberg Commodity Agriculture Subindex has delivered a total return of 3.2% so far in 2025, contributing positively to the broader Bloomberg Commodity Index, which is up approximately 5.6% year-to-date, the bulk of which stems from gold’s relentless rally. This performance comes amid a turbulent backdrop characterized not only by volatile weather conditions, but also by escalating geopolitical tensions—most notably, the resurgence of President Trump’s trade war, which has significantly impacted global trade flows and currency markets. The trade conflict has weighed heavily on the U.S. dollar, which has weakened nearly 7% year-to-date against a basket of major currencies. Yet, despite what would typically be a tailwind for American exports, the weaker dollar has offered little relief. Widespread tariffs and retaliatory measures—especially from key buyers like China—have offset the competitive advantages that would normally accompany currency depreciation.
Several key food commodities have felt the brunt of these developments. U.S. soybean, soybean meal, and corn exports have declined notably due to reduced Chinese demand, with buyers increasingly turning to South American suppliers such as Brazil and Argentina. The U.S. Department of Agriculture recently reported a staggering 73% plunge in cotton exports to China, highlighting the sharp impact of retaliatory tariffs. As a result, U.S. cotton futures recently slumped to their lowest levels in four years.
On the opposite end of the spectrum, Arabica coffee has surged by 27.5% year-to-date. The rally has been fueled by crop concerns in Brazil, where frost-induced flower loss and persistent moisture stress have severely affected the 2025/26 harvest outlook. These factors have effectively erased expectations of a surplus, sending prices sharply higher.
In the livestock sector, U.S. live cattle futures have jumped 27.1% year-to-date, recently hitting consecutive record highs. The surge is driven by the smallest cattle herd since 1951, following a period of drought that have diminished pasture quality and forced widespread herd liquidation. Further tightening the supply, temporary import restrictions from Mexico—due to a screwworm infestation—have compounded the pressure on U.S. beef availability.
Speculators hold large longs in coffee and cattle, big shorts in wheat and cotton
Speculative positioning in major futures markets—including agricultural commodities—can be tracked weekly through the CFTC’s Commitment of Traders (COT) report, which breaks down open interest by category of market participants. In the commodities space, particular attention is paid to the behavior of managed money accounts such as hedge funds and commodity trading advisors (CTAs) for several key reasons:
- They typically operate with tight stop-losses and hold no underlying physical exposure to hedge.
- This makes them highly sensitive and reactive to changes in both fundamental and technical market conditions.
- Their positioning provides insight not only into prevailing market trends, but also into potential turning points when sentiment becomes stretched.
As shown in the table below, taken from our weekly update (typically published on Mondays), speculators are currently holding net long positions across all three agricultural subsectors. The strongest bullish conviction is evident in live cattle, coffee, and soybean oil. On the bearish side, cotton, soybean meal, and particularly wheat stand out—speculators have maintained a net short position in CBOT wheat since June 2022, which has now grown to its largest level in two years.
Recent commodity articles:
6 May 2025: Crude climbs as market digests OPEC hike and shale slowdown risks
6 May 2025: Gold rises as Chinese demand rebounds post-holiday
5 May 2025: COT Report: Dollar-selling persists; Crude length trimmed ahead of OPEC output hike
1 May 2025: Gold corrects sharply from record highs as Chinese demand pauses
29 April 2025: Copper navigates energy transition supply shocks and market turmoil
28 April 2025: COT Report: Continued gold selling; USD weakness drives record JPY long
25 April 2025: Commodities weekly Energy slump overshadows strength in gold and agriculture
23 April 2025: Blowout top leaves Gold in consolidation mode
22 April 2025: Commodities return Why allocation matters
16 April 2025: Whats next as gold hits our USD 3300 target
15 April 2025: COT Reports show hedge funds racing to cash post-Liberation Day
11 April 2025: Commodities weekly As chaos reigns whats next for markets
10 April 2025: YouTube Interview: Gold, silver, copper, oil - prices, supply, demand in 2025
8 April 2025: Golds deleveraging pullback fails to shake supportive outlook
8 April 2025: Golds deleveraging pullback fails to shake supportive outlook
7 April 2025: COT on Forex and Commodities - April 7 2025
4 April 2025: Commodities weekly Tariff-led recession pain triggers sharp reversal
3 April 2025: Tariff-related recession fears ignite widespread commodities selloff
2 April 2025: Commodity Outlook: Commodities rally despite global uncertainty
31 Mch 2025: COT Report: Ongoing USD selling amid mixed week for commodities
26 Mch 2025: Commodities show strength in Q1, led by a select few
Podcasts that include commodities focus:
6 May 2025: Bears hang in at key levels as Palantir rides the retail whirlwind
23 April 2025: Trump going soft on tariffs versus the direction of travel.
11 April 2025: US and China are slipping into an economic war
4 April 2025: Markets melts down as recession risks go global
1 April 2025: Bracing for Liberation Day
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