Declining US Grain Supplies Send Commodity Prices Skyrocketing

It appears that a second commodity boom may be on the horizon, as US crop prices soared to the highest level in nearly eight years amid tightening global supplies and increased Chinese purchases.

Declining stockpiles of US grains have caused prices for corn, soybeans, and wheat to soar, as a dry climate in major growing regions affected the 2020 crop year. Over the past week, corn prices surged to $5.17 per bushel — the highest level since July 2013. Meanwhile, soybeans and wheat also skyrocketed to levels not seen in over seven years, reaching $14 per bushel and $6.60 per bushel, respectively, on Wednesday.

According to data published by the USDA, the country’s domestic corn production is expected to reach 14.2 billion bushels for the current marketing year, which is 325 million bushels short of last month’s projection, and 1.1 billion bushels less than preliminary summer estimates for the 2020 crop year. As a result, stockpiles of corn are forecast to drop by nearly 150 million bushels to 1.55 billion bushels, which amounts to a decline of 1.2 billion bushels compared to last summer’s levels.

The price gains mark a sudden reversal from the beginning of the year, when the coronavirus crisis created uncertainty surrounding global grain consumption. Now however demand has begun to climb, especially with China ramping up grain imports in order to increase hog herds after millions were culled due to African swine fever.

Information for this briefing was found via the USDA and the WSJ. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

Leave a Reply