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On Thursday, U.S. corn and soybean futures experienced a considerable decline, reaching their lowest levels in over three years. This sharp downturn was prompted by the U.S. Department of Agriculture’s (USDA) forecast of high production and ending stockpiles across grains, which delivered a bearish outlook for agricultural futures.
USDA Predictions and Market Reaction
During its annual Agricultural Outlook Forum, the USDA presented projections that domestic corn stocks are anticipated to surge by 17% from the conclusion of the 2023-24 marketing year to a substantial 2.53 billion bushels by the culmination of the 2024-25 period. This surge would represent the most significant jump since 1987-88. Furthermore, the USDA forecasted that soybean ending stocks will soar by 38% to 435 million bushels by the end of the 2024-25 marketing year, marking the highest level since 2019-20.
The consensus estimates of analysts had previously projected U.S. corn stocks for 2024-25 at 2.59 billion bushels and soybean stocks at 411 million bushels, making the USDA’s outlook even more impactful.
Factors Influencing Demand and Prices
The USDA’s Seth Meyer highlighted weaker Chinese demand for exports due to economic concerns, which is expected to reduce the appetite for U.S. crops in the face of South American competition. This contributed to a decrease in demand for U.S. grains, exacerbating the downward pressure on prices.
As a result of these projections and market developments, CBOT corn for March delivery closed at a significant -1.5% to $4.17 3/4 per bushel, while March soybeans finished -0.6% lower at $11.63 per bushel, with both reaching their lowest levels since December 2020. Furthermore, CBOT wheat futures fell the most, with the March contract declining by -3.4% to $5.65 1/2 per bushel, reaching the lowest levels since November, underlining the substantial impact of the USDA’s forecast on market sentiment.
Market Sentiment and Forward Outlook
Many of these markets are considered oversold, with managed money holding significant short positions. StoneX chief commodities economist Arlan Suderman told Reuters, “Thus far there isn’t a headline to create concern among these money managers to cause them to change their positions.” These sentiments underscore the mammoth pressure on the market stemming from the USDA’s predictions and the broader economic landscape.
ETFs: (NYSEARCA:CORN), (NYSEARCA:SOYB), (NYSEARCA:WEAT), (DBA), (MOO)