Grain Market Struggles: Oversupply and Demand Concerns Damage Outlook

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February 27, 2024

Wheat corrects, corn declines, and soybeans hit their lowest since 2020.

Wheat

Global wheat oversupply and demand concerns increased short positions

 

  • Wheat futures surged to $5.9 per bushel, rebounding sharply from a recent low of $5.6 on February 16th.
  • Uncertainty surrounding the North American spring growing season led commodity funds to trigger a short-covering rally.
  • US and European farms lowered their asking prices to remain competitive in foreign markets.
  • The latest WASDE report confirmed Russia’s wheat production forecast at 91 million tons, just 1 million shy of the record-high from the previous year.
  • This increased available wheat for export to an all-time high of 51 million tons, making Russia the largest exporter globally.
  • Global wheat production forecasts for the current marketing year were revised upward, mainly due to a 1-million-ton increase in selected Middle Eastern countries.
  • This revision eased foreign demand from the world’s top importing region.

Corn

The price of US corn futures dropped, nearing their lowest levels since November 2020

  • Chicago corn futures dropped to $4.1 per bushel. The decline was driven by ample global supplies and subdued demand forecasts.
  • The USDA projected that US corn stocks would reach 2.532 billion bushels by the end of 2024/25, a 17% increase from the previous year and the highest level since the 1987/88 season.
  • Additionally, US farmers are expected to plant less corn and more soybeans in 2024 compared to the previous year.
  • Meteorological forecasts predicting rainfall in South America reinforced the perception of a supply glut in the corn market.

Soybeans

Oversupply and demand concerns contributed to the decline in soybean prices

  • Soybean futures drop below $11.5 per bushel, the lowest since November 2020.
  • There has been increased production in key South American countries Brazil and Argentina.
  • Rosario Grains Exchange predicts 49.5 million metric ton soybean harvest for 2023/24.
  • USDA forecasts US soybean stocks to reach 435 million bushels by the end of 2024/25 marketing year, which is the highest level since 2019/20.
  • Decrease in Chinese demand for animal feed contributed to increased US soybean stocks.