Agriculture Supported by Low Supply

Wheat

Wheat futures strengthened due to limited supply from Europe

• Wheat prices rose past $5.6 per bushel, rebounding from a 4-year low amid tightening global supply.
• Despite the availability of cheaper wheat from the Black Sea region, overall supply remains constrained.
• Additionally, Ukraine’s grain exports have soared 68% y/y, solidifying its role as a major global exporter of wheat and corn.
• In Europe, heavy rains have damaged wheat crops in Germany and France, but low-cost exports from the Black Sea continue to satisfy global demand, further squeezing US export competitiveness.

China’s weakened exports drive corn lower

• Corn futures rebounded from their lowest level in nearly four years, driven by a robust production outlook.
• Futures remain above the $4 mark, but favorable weather conditions and anticipated record yields could influence this in the short term.
• USDA corn estimates see a yield of 183.1 bushels/acre and an increase in ending stocks expected to surpass 600 million bushels.
• Meanwhile, sluggish demand from China, which has significantly decreased its imports compared to previous years amid economic uncertainties and changing policies, further exacerbates the downward pressure on prices.
• Despite record ethanol production rates providing some market support, the projected increase in ending stocks, expected to exceed 600 million bushels, indicates a challenging landscape for corn prices in the future.
• Similarly, in Brazil, low corn prices are influenced by a significant drop in exports to China compared to the previous year, reflecting a broader slowdown in global corn demand.

Soybeans trade at 2020 levels, ending stocks surged above estimates

• Soybean prices rose to $10/bushel, rebounding from a 4-year low, driven by supply concerns as adverse weather in the Midwest raised fears of reduced yields.
• The recent hot and dry conditions in the US Midwest have heightened worries about the potential impact on the anticipated bumper corn and soybean harvests.
• This heat wave has bolstered prices in recent sessions, as it threatens to damage the soybean crop during a crucial stage of its development.
• While recent rainfall has alleviated dryness in some areas, uncertainty remains about whether it will be enough to allow the soybean crop to reach its full potential.