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Agriculture markets diverge as trade war, weather, and speculators reshape landscape
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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.
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Podcasts that include commodities focus:
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