Corn, soybean, wheat prices soar after USDA supply downgrade report
By Onome Amuge
The recently released World Agricultural Supply and Demand Estimates (WASDE) for January by the US Department of Agriculture (USDA) has intensified fears of shortages for global supply of soybean, corn and wheat in 2021.
This comes after the USDA end-of-season report projected that soybean, corn and wheat supplies will fall below trade expectations.
The supply crunch, according to market analysts, is as a result of governments locking extra food supplies amid the COVID-19 pandemic and unfavourable weather conditions that have disrupted supply chains and thinned stockpiles in top producing countries, including the U.S, Brazil and Argentina, major export countries of the grains.
Soybean production in top-producer Brazil was pegged at 133.00 million tonnes, while its corn harvest was lowered at 109.00 million tonnes.
In Argentina, where farmers have struggled with drought throughout the growing season, USDA predicted a soybean harvest of 48.00 million tonnes and a corn harvest of 47.50 million tonnes.
More so, U.S. corn production for the 2020-2021 marketing year was pinned at 14.182 billion bushels while expectation for soybean production was reduced to 4.135 billion bushels.
The USDA also lowered the 2020-2021 domestic soybean ending stocks outlook at 140 million bushels, down from its December forecast of 175 million, and corn ending stocks at 1.552 billion bushels, a decline from the previously predicted 1.702 billion in December.
As a result, concerns about tight supplies have pushed corn, soybean and wheat futures higher with expectations of the grains reaching multiyear peaks in coming weeks.
On Tuesday, corn jumped by as much as 5 per cent to stand at $5.39 a bushel while soybeans added nearly 4 per cent at $14.37 a bushel, with wheat gaining almost 5 per cent at $6.67, a little below the 2014 peak of $6.76.
Terry Reilly, senior analyst with leading agricultural markets exchange brokerage group, Futures International, explained that the decreased production estimates will disrupt the grain market.
He noted that asides the reduction in current crop year supplies, the demand for grains, especially soybean, is fairly strong and has proved a major concern for investors.
On his part, Jack Scoville, analyst with Canadian based food service industry, Price Group, said nobody was expecting corn production to drop like that. The USDA, he stated, underestimated the damage of the weather conditions in production regions and probably overestimated some of the better areas during its previous forecasts.
As a result of the projected drop in supply, Argentina has moved to curb corn exports, while top wheat exporter Russia is considering raising a previously announced export tax on the grain as it continues to battle wintering conditions affecting its wheat production, leading to expectations of further price hikes in the global market.