U.S. grain futures, which rose to multi-year highs, have recently retreated significantly, with weather favorable to crop planting the driving force behind the decline.
On Tuesday, 25 EST, U.S. Chicago Board of Trade (CBOT) corn futures fell 5.6% intraday, the largest intraday decline since August 2019, setting a new intraday low since April 23 to $6.2025 per bushel. On the same day, both soybean and wheat futures at the CBOT also sank, with wheat futures having fallen 2.3% intraday to $6.4675/bushel, a new low since mid-April. The losses in wheat and soybean futures have now narrowed to more than 1% and are expected to continue a week of back-to-back losses.
Commentary suggests that corn and soybean futures fell because recent rains have spurred crop planting in the southwestern U.S., where the pace of planting has accelerated, and because Chinese corn purchases last week boosted traders’ expectations for U.S. export demand. Wheat futures fell because the prospect of a bumper U.S. winter wheat crop has increased competition for exports in the global wheat market.
The U.S. Department of Agriculture (USDA) released its latest spring planting update, showing that corn across the U.S. was planted 10 percent faster than the five-year average last week and is nearing the end of spring planting. Rain showers are bringing help to farmland in much of the Black Sea region and Europe, according to Maxar weather forecasts, and will also moderate drought in parts of Canada’s spring wheat production areas.
Don Roose, founder and president of commodity broker U.S. Commodities, noted that the drought in parts of Iowa, Wisconsin and the Dakotas in the U.S., which was previously feared, has improved, at least for now, after the rains. Regarding China’s efforts to curb rising commodity prices, he said some are wondering if China will keep buying.
Yicai reported recently that two consecutive State Council executive meetings have focused on rising commodity prices so far this month. One of the meetings last week pointed out that some commodity prices have continued to rise this year, with some varieties reaching record high prices, and that great attention should be paid to the adverse effects of rising commodity prices, to protect the supply of commodities, to curb their unreasonable price increases and to try to prevent the transmission to consumer prices.
There are also comments that agricultural prices are back to several-year highs due to previous drought in some crop exporting countries, especially Brazil, which has triggered market concerns about reduced corn production in South America. Good crop growing conditions have recently helped agricultural prices fall off their highs again.
However, there are still concerns about South American crop yields after the Brazilian drought. Tobin Gorey, a strategist at Commonwealth Bank of Australia, believes analysts are assessing the upcoming second season crop and that corn could soon see a supply shortage.
National Australia Bank agricultural economist Phin Ziebell, on the other hand, said the weather forecast shows that the U.S. Midwest will have more rainfall in the next three weeks to improve the drought phenomenon. U.S. soybean corn crop weather has improved, hitting an eight-year high in soybean corn prices suffered some profit-taking selling pressure, but given that demand remains strong, he does not expect prices of soybeans and corn to fall back sharply.
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