Shrinking Grain Supplies Send Prices Soaring
Dwindling stockpiles of U.S. grains have sent prices for corn, soybeans and wheat skyrocketing.
Corn futures opened trading Wednesday up 2.5% after rising Tuesday by the maximum allowed by the Chicago Board of Trade to more than $5.17 per bushel. The move followed the U.S. Department of Agriculture’s monthly supply and demand report showing corn production falling short of expectations.
This week’s surge carried corn to its highest close since July 2013. Soybeans and wheat are also trading at their highest levels since 2014 this week, with soybeans above the $14 per bushel mark and wheat at $6.65 per bushel Wednesday.
“It’s an off-to-the-races kind of thing,” said Jason Britt, head of Central States Commodities in Kansas City, Mo.
Dry weather in key growing regions of the U.S. and South America has hit domestic corn production, which is expected to total 14.2 billion bushels for the current marketing year, 325 million bushels less than projected last month and 1.1 billion bushels below initial projections for the 2020 crop last summer, according to the USDA report.
Stockpiles of corn are expected to fall by approximately 150 million bushels to 1.55 billion bushels, down 1.2 billion bushels from last summer. The decline exceeded the drop projected by analysts surveyed by The Wall Street Journal. The USDA also cut its soybean stockpile forecast and wheat stockpiles were adjusted lower.
The price gains mark a sharp reversal from earlier in the year, when the global coronavirus pandemic cast doubt about grain consumption. Now, demand is climbing, particularly from China, which needs grains to rebuild hog herds after culling millions infected by African swine fever.
The moves are also part of a broad recovery in so-called soft commodities. Cotton futures on the
this week are trading at their highest level in more than two years. Sugar futures hit their highest level since 2017 this month.
Many factors could sap the momentum. The pandemic rages on and vaccine distribution remains slow, with new cases in the U.S. still exceeding 200,000 cases on Tuesday. A slower-than-expected economic recovery could pressure commodities prices.
The Biden administration’s dealings with China could also shift the outlook for commodities, after the country’s tensions with the Trump administration sparked price swings in recent years.
Some market participants are optimistic that relations will warm. “There’s a general perception that a Biden administration will be friendlier than a Trump administration,” said Sal Gilbertie, president of Teucrium Trading.
Dan Basse, president of Chicago-based agricultural research firm AgResource Co., expects the current dynamics to continue lifting CBOT futures prices through the first half of the year. He projects that soybean futures could rise to as high as $20 per bushel this year—which would be a record.
“This whole thing has runway,” he said.
Write to Kirk Maltais at Kirk.Maltais@wsj.com