Chicago corn futures again reached lows this week, and soybean prices are fluctuating at single-digit levels, as a bountiful harvest is expected in the US. This is reported by Reuters, writes UNN.
Details
December corn prices are still slightly higher than last year's, and November soybean prices are at a five-year low for this date. However, adjusted for inflation, average monthly corn and soybean prices to date are at their lowest July level since 2006.
This grim milestone comes at a time when American exporters are struggling to protect their once unassailable share of the global grain and oilseed market from ever-increasing production in Brazil.
The fall in prices is particularly painful for American farmers, as production costs remain relatively high. Corn prices have fallen by at least 30% since mid-2022, both in nominal and adjusted terms.
However, the average cost of corn production across the country this year is only 3% lower than in 2022, and 11% lower when adjusted for inflation.
This means that a corn price of $4 per bushel is not the same as $4 for corn several years ago, even though current US supply forecasts are historically modest.
Since the beginning of this month, on the Chicago Mercantile Exchange, the average price of December corn futures and November soybean futures was $4.21 and $10.20 per bushel, respectively. For comparison, the average prices for the entire month of 2024 were $4.12 and $10.67.
US data on Tuesday showed that the consumer price index in June rose by 2.7% compared to the same period last year, as a result of which the average price of corn in July 2024 in real terms was $4.23, which is slightly higher than current levels and corresponds to the adjusted price of July 2.
In nominal US dollars, since 2006 inclusive, there have been 11 Julys when average corn prices were lower than current ones. However, adjusted for inflation, today's price of $4.21 is the lowest since $4.19 per bushel in 2006 (nominal price $2.65).
Since 2006, there have been nine July periods when nominal soybean prices were lower than this month's rolling average of $10.20. After adjustment, this is again the lowest since 2006 ($9.74 per bushel; nominal price $6.15).
This week, corn and soybean prices rose. However, they are significantly lower than the annual highs reached in February, when American farmers were provided with insurance guarantees for the upcoming harvest.
However, since then, the price decline has not been extraordinary, which could be an unfavorable factor for optimistic speculators. December corn this month is trading 10% below the average February price, which is less than in the previous two years.
Soybean prices in November are approximately 3% lower than in February, although during this period, four of the last seven years, including 2024, saw a greater decline.
Is this justified by the offer
The US Department of Agriculture forecasts a 24% year-over-year increase in US corn ending stocks in 2025-2026. This follows a projected 24% decrease during 2024-2025, which ends on August 31.
A year ago, a 12% increase was forecast for 2024-2025, comparable to the 2020-2021 forecast, which predicted an 18% increase. It should be noted that adjusted corn prices in July 2020 and 2024 were practically identical to current ones, which at least partially confirms the current dynamics of supply prices.
The argument becomes less convincing when comparing volumes. The projected volume of corn carryover stocks in 2025-2026 is 1.66 billion bushels, which is 21% and 37% lower, respectively, than the forecasts for 2024-2025 and 2020-2021 for the same period.
However, the market may well trade the 2025-2026 carryover crop closer to 2 billion bushels, given the huge prospects for corn yield growth, which reinforces the argument for low prices.
US soybean ending stocks in 2025-2026 are expected to decrease by 11% compared to the same period last year. This is the first year-over-year supply decrease projected in July since 2020 (-32%). In July 2019, a 24% decrease was projected, although adjusted average soybean prices for these two Julys exceed $11 per bushel.
Forecasts for July US soybean stocks for 2019-20 and 2020-21, which were 795 million and 425 million bushels respectively, significantly exceed the 2025-2026 forecast of 310 million bushels. This could support soybean prices, especially if August weather forecasts prove unfavorable.
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