News in brief:
– US corn and soybean futures hit three-year lows due to expectations of ample South American harvests and rising stockpiles, driven by uncertain demand and favorable weather conditions.
– The sell-off trend may persist, with analysts anticipating prices below $4, but cautioning that substantial short positions held by investors could lead to rapid rallies in the future.
Amidst diminishing fears over South American supply shortages, US corn and soybean futures reached multi-year lows on Thursday. This decline reflects expectations of robust harvests in South America alongside escalating stockpiles, a development clouded by uncertain demand, analysts reported.
Chicago Board of Trade (CBOT) March corn futures settled at $4.06 per bushel, marking a 5-cent drop and hitting $4.04-1/4, the lowest in the active corn contract since November 2020. Similarly, CBOT March soybeans ended at $11.47-3/4 per bushel, down by 13 cents and touching $11.46-3/4, the lowest for a leading soybean contract since December 2020. Meanwhile, CBOT May wheat witnessed a modest rise, closing at $5.79-1/4 per bushel.
The downtrend in corn and soybean futures gained momentum with optimistic South American harvest projections, despite occasional weather uncertainties. Terry Reilly, senior agricultural strategist at Marex, emphasised favourable conditions in South America, particularly in Brazil and Argentina, contributing to improved crop prospects.
Recent rainfall in Argentina has significantly improved crop conditions, as reported by the Buenos Aires Grains Exchange. Despite slight reductions in yield estimates, projections for soybean and corn harvests remain promising, with expectations of 49.5 million metric tons of soy and 57 million tons of corn for 2023/24, marking substantial growth compared to previous years.
Following a record-breaking US corn harvest in 2023, speculation surrounding increased grain inventories and reduced Chinese demand for animal feed has intensified. This sentiment has prompted significant short positions in corn and soybean futures. Ole Houe from IKON Commodities anticipates further decline, emphasizing the weight of the South American crop on the market. However, he cautioned about the potential for rapid rallies, given the substantial short positions held by investors.
