January 30, 2024
Decline in major agricultural futures, the impact of South American harvests, and global wheat dynamics have driven downward pressure on agricultural prices.
Speculators increased their short positions amid increased projected production
- Wheat futures dropped slightly below $6 per bushel.
- Reasons for the fall include technical selling and abundant supply from South America.
- Argentina’s recent wheat harvest recorded 15.1 million tons, marking a 25% increase from the previous year’s drought-affected cycle.
- USDA raised production forecasts for Russia to 91 mil tons, just 1 million below the previous year’s record high, resulting in a record high of 51 mil tons for export.
- Ukrainian wheat stock projections were increased to 3.5 million tons.
- China, a major global wheat consumer, permitted Argentine companies to export wheat to China for the first time, increasing competition.
Increased corn crops in South America and concerns about weak demand kept short positions on the rise
- Chicago corn futures declined to approximately $4.4 per bushel, marking a more than three-year low.
- The movement was pressured by expectations of ample supplies from South America and concerns about weakening demand.
- BAGE experts increased the forecast for Argentine corn crops by 1.5 mil tons to 56.5 million tons, a 3% rise from the previous forecast and surpassing the USDA estimate of 55 mil tons.
- Widespread showers in Brazil alleviated concerns about earlier drought damage to corn crops.
- In the US, both S&P Global and Farm Futures updates indicated that growers were expected to slightly reduce corn plantings to 93 mil acres.
- Despite the slowdown in demand, near-record harvests were projected in the US.
Increased supply due to record rain in South America results in more short positions by speculators
- Soybean futures dropped to $12/bushel, hitting the lowest point since November 2021.
- Anticipation of strong harvests in South America and reduced demand for soy meal and oil contributed to the overall decrease.
- The BAGE raised Argentina’s crop forecast to 52.5 million metric tons, reflecting a 1% increase from its previous estimate.
- USDA raised its production forecast for US soybeans in 2023/24 to 4,165 million bushels, with yields at 50.6 bushels per acre.
- Ending stock estimates for 2023/24 rose to 280 million bushels.
- China’s hog sector decline may lead to a four-year low in soybean imports during the first quarter.