No end in sight for corn and soybeans price plunge

Farmers in the United States and Brazil are in trouble as prices of key commodities continues to plunge. Soybean’s price has crashed to a low of $1,220, its lowest level since November 2021. It has dropped by more than 30% from the highest point in 2022.

Corn, soybeans, and wheat prices have slipped

Similarly, corn price has plunged to $4.6 a bushel, 44% below its highest point in 2022. Other agricultural commodities like wheat, sugar, and cotton have been under pressure in the past few months as well. This trend is beneficial for most people who are seeing inflation move downward. 

Soybeans vs Corn prices

Corn and soybeans are struggling because of the difficult demand and supply dynamics. Supply has risen sharply globally, helped by good weather in countries like Russia, Ukraine, and in some European countries. 

In the most recent WASDE report, the USDA said that production in these countries rose and was offset by a decline in Bulgaria and Mexico. Global corn stocks also rose marginally to 315.2 million tons.

Soybeans have also seen higher production in countries like Russia and Canada as Brazil’s output dropped. The WASDE report added:

“Increased supplies and early exports in the 2023/24 marketing year (starting October 2023) led to a 2.0-million-ton increase to Brazil’s exports.”

The performance of soybeans and corn is also because of Brazil’s growing dominance in the agricultural industry. China, the biggest consumer of corn and soybeans in the world, has opted for more Brazilian products compared to the US.

Brazil’s commodities are often cheaper than those produced in the United States, where wages have continued rising recently. Transport costs from farms to ports have also increased as the volume of the Mississippi River falls.

US and China tensions

Growing tensions between the US and China have not helped the agricultural sector. With Trump promising more tariffs for Chinese goods, there are concerns that we could go back where we were in 2018. 

To solve this crisis, China has increased its purchases of corn and soybeans from Brazil, Argentina, and other countries. Beijing has also put more pressure on its citizens to boost agricultural production. As a result, a report showed that China’s total grain output jumped to a record high of 687 million tons in 2021 and the trend is expected to continue.

The ongoing corn and soybeans crash has a silver lining because they tend to be highly cyclical. A sharp retreat in prices leads to lower production, which leads to higher prices in the long term.

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