A comprehensive statistical analysis of grain and oilseed markets over four decades has found that surpluses in U.S. and Rest-of-World (ROW) production relative to domestic consumption are significantly linked to U.S. price changes, while similar surpluses from South America and China (SAC) are not. This finding challenges prevailing narratives in commodity markets and suggests a strategic rethinking for U.S. producers, traders, and policymakers.

The data, sourced from USDA's PSD and QuickStats databases, covered 13 crops including barley, corn, rice, soybeans, and wheat from 1981 through 2024. Using multivariable regression analysis, the study constructed a U.S. composite grain-oilseed price index by converting per-bushel prices to per-pound values, weighting them by production share, and summing them across crops. The analysis then assessed how yearly changes in production surpluses from three regions-U.S., SAC, and ROW-correlated with annual percent changes in that composite price.

The results are compelling: both U.S. and ROW surpluses are statistically significant with 99% confidence. SAC, however, does not cross the standard threshold for significance, with only 87% confidence. In practical terms, SAC surpluses do not reliably explain U.S. price changes, despite their perceived influence.

A 1% change in production surplus relative to consumption in ROW leads to a 3.60% change in U.S. grain-oilseed prices, while the same 1% change in the U.S. leads to a 0.84% shift. Though ROW's influence appears greater per unit change, the U.S. surplus ratio is more volatile, with a standard deviation seven times larger than ROW. Together, these two factors account for the bulk of predictable price movement.

Multivariable Regression Results of Yearly Percent Change in U.S. Composite Grain-Oilseed Price, 1982-2024

Collectively, the three regional surplus variables explain 48% of the year-to-year variation in U.S. grain-oilseed prices. That leaves 52% of price variation attributable to other factors-likely weather, energy markets, currency shifts, and trade disruptions. Nonetheless, for a multivariable model on percent change, 48% explanatory power is considered strong.

The takeaway? U.S. agriculture should refocus its analytical and strategic lens. While South America and China are major players, their combined production-consumption balances have remained nearly flat for over 40 years. China's rising consumption has offset South America's rising output. Even without current geopolitical tensions, South America has become China's preferred grain supplier, partly due to offset harvest windows that complement China's logistics and reduce storage pressures.

As of 2017, even before the U.S.-China trade war began, China was sourcing 63% of its soybean imports from South America. That trend has only deepened. For the U.S., that means future export growth may hinge more on the broader global market (ROW) than on SAC. Shifts in export focus could bring regional impacts within the U.S., depending on transportation costs and port access.

From a policy perspective, these findings support strengthening domestic and global market analysis within the Farm Bill framework. Precision agriculture, crop insurance, and trade facilitation programs should account for the dominant role of U.S. and ROW dynamics. Additionally, supply chain resilience and transportation infrastructure will be increasingly critical as U.S. exporters engage with more diverse global buyers.

In conclusion, the U.S. grain and oilseed sector would benefit from a shift in focus away from South America-China dynamics and toward understanding and responding to internal and rest-of-world supply-demand conditions. For commodity pricing, it's not just who's producing-but how much more than they consume, and where the surplus goes.