Corn, Wheat Soar to Seven-Year High on Supply Concerns

By Andrew Moran April 26, 2021, 7:04 pm • Posted in Commodities

Corn futures are trading at their best levels in seven years, buoyed by supply and weather concerns. The highest commodity prices are likely to influence fears about inflation for a broad array of consumer food products. Will this trigger a substantial rally in corn-related stocks, such as Archer Daniels Midland and CVR Partners?

May corn futures surged $0.245, or 3.87%, to $6.57 per bushel at 17:51 GMT on Monday on the Chicago Board of Trade (CBoT). Corn prices have rallied about 20% this month, adding to their monster year-to-date gain of 35%.

Corn was on the cusp of triggering an “limit up.” CME Group has mechanisms in place that temporarily halts trading to manage intraday volatility. Corn was close to touching this level.

In the Upper Midwest, like North and South Dakota, drought conditions are stoking shortage concerns. The two states have seen their production plunge 7.5% this year, as well as a 10% decline for soybeans. Even before this data, the market had been tightening amid soaring demand, leading to inventories unseen in years. This has triggered a substantial surge in commodity prices.

Commerzbank said in a research note to clients last week:

“The price surge and the already high price level, especially in the case of corn, also reflect the nervousness in view of the current tightness on the markets, which is expected to be repeated in 2021/22.”

This has led various market analysts to slap “buy” ratings on various commodity stocks.

Does this mean a severe bout of inflation is here for the rest of the world? The Federal Reserve has stated that there will be a short-term spike in inflation as the US economy begins to reopen. However, the central bank reassured the public that higher inflation above the 2% target would be short-lived once the initial jolt of the reopening has passed.

In other agricultural commodities, May wheat futures soared $0.28, or 3.93%, to $7.4025 per bushel. May soybean futures advanced $0.2475, or 1.63%, to $15.4075 per bushel. June coffee futures rose $0.006, or 0.42%, to $1.4395 a pound.