Soybean futures and the broader agricultural commodities extended their losses on Thursday as changes in weather models and growing recession fears weighed on crops. Will prices continue trending lower and help ease global food inflation? Market analysts say that it might depend on the summer months and China.
July soybean futures plunged $0.61, or 4.13%, to $14.155 per bushel at 17:45 GMT on Thursday on the Chicago Board of Trade (CBoT). Soybean will record a weekly loss of at least 17%, paring its year-to-date gain to below 6%.
July wheat futures slumped $0.26, or 2.63%, to $9.625 a bushel. July corn futures plummeted $0.3625, or 5.23%, to $6.575 per bushel.
Right now, the downward trend is being driven by weather conditions and foreign demand.
Chinese soybean inventories have tripled in the last three months, with stocks increasing 14% to 1.09 million tons. This is three times the level since the end of March.
“Domestically, soymeal inventories have been rising and pressure has been quite massive,” said Zou Honglin, analyst with the agriculture section of Mysteel, a China-based commodity consultancy.
The US Department of Agriculture (USDA) published its Crop Progress report that confirmed corn ratings were 70% good or excellent, down 2% from the previous estimate. Soybean ratings also slipped 2% to 68% good or excellent, while spring wheat ratings were up 5% to 59% good or excellent.
As FX Daily Report noted earlier this week, there had greater fund selling in the agricultural market, with institutional investors either adding to their net short positions or trimming their net long trades.
But market analysts do not think this trend will persist because of how dependent the global economy is on Eastern Europe exports, compared to 2008 when the US accounted for much of the world’s supply.
“In mid-2008, U.S. corn stocks for the 2008-09 marketing year were predicted falling to half the previous year’s levels, to more than decade lows, adding to market anxiety. Demand was vastly overstated early on, though, and actual stocks came in a bit above the prior year and in line with other recent years,” wrote Karen Braun, a market analyst at Reuters.
“The outlook this year is much different, as forward U.S. and global corn supplies relative to demand are seen largely unchanged from the current levels. However, the balance sheet is still a bit tighter than the longer-term average.”
In other agricultural markets, August live cattle futures tumbled $0.01125, or 0.83%, to $1.338 per pound. July coffee futures declined $0.0085, or 0.37%, to $2.2815 a pound. July orange juice futures were flat at $1.6625 per pound.