Ag Futures Sink on Recession Fears, Despite Fundamentals

Amid a broad global selloff across asset classes, US wheat, corn, and soy futures fell to multi-month lows today, even though fundamentals and early crop health conditions for each commodity tell a far different story.  

The latest NDVI readings for the US’ corn and soybean crops reveal signs of distress, and Gro’s in-season Yield Forecast Models for both crops currently point to yields well below last year. These yield outlooks will improve if crop conditions recover.

For soybeans, the USDA’s June 30 Acreage Report indicated 2.63 million less soybean acres than the March Planting Intentions Report and comfortably below the average trade estimates. Gro forecasts that this decline in acreage will significantly impact US soybean ending stocks in next week’s July 12 WASDE release, pulling US soybean stocks to their lowest level in seven years. 

In CBOT wheat futures, which have retreated 37% off their May high, a similar story is unfolding. Wheat futures’ war premium has been erased, even though Ukraine is not expected to have exportable wheat supplies until there is a major resolution in the ongoing conflict. 

In trading today, weekend rains sparked the early weakness in corn, but negative outside markets accelerated selling during the day session. Corn futures are 24% off their 2022 highs. Soybean futures, meanwhile, are 15% down from their intraday high on February 24, and soybean oil futures have plunged 28% since late April.

Heading into today’s tumultuous trading session, most funds were positioned for inflation, and likely caught flat footed by this move lower because net positioning was overwhelmingly long.

Crude oil was down 8.5% on Tuesday, while Dow Futures were off 133 points, down 14% year-to-date. 

With Gro’s US consumption-weighted food price index up 22% year-over-year, today’s selloff in futures prices offers some relief from record high levels, but prices remain substantially higher than this time last year. Also, much of the inflation impact is still working its way through the agriculture value chain. Chicken prices, for example, are up over 50% from last year.  

As the US dollar index is currently trading at a 20-year high, inflation pressures outside of the US, particularly for countries that rely on food imports, will remain elevated. As Gro has previously highlighted, poorer nations, where food is a larger percentage of consumption, still face severe risks from food inflation.  

-Related Insights 

US Acreage Planted to Soybeans Tumble, Raising Supply Concerns 

Hot and Dry Weather Tees Up a Tense July in the US Corn Belt 

Global Wheat Supplies Face New Threats as Drought Levels Rise, Gro Model Shows