Crop futures plunged Thursday June 17 across the board, with grains notching the worst rout in a dozen years, according to Bloomberg.
Soybeans wiped out this year’s gain and grains lost more ground as better weather and uncertainty over U.S. biofuel policy erodes bullish sentiment. Corn, soybean oil, and canola futures all dropped by the exchange limit, and lean hog futures plunged the most in almost seven months.
A stretch of better weather across America’s farmlands, concern about Biden administration biofuel rules, and fear of slowing U.S. hog exports are sending prices lower and raising questions on whether the recent rally to multiyear highs has peaked. Rainfall over the next few weeks could answer that question.
“Grains are in a weather market right now and will be through July,” Sal Gilbertie, President of Teucrium Trading, told Bloomberg. “The market has pulled back because timely and much needed rains are in the forecast for the U.S. grain belt. If rains appear we may have seen at least a short-term price top, but if it does not rain enough or in the right spots the market is likely just consolidating.”
Prices for soybeans had surged as much as 27 percent through mid-May, topping their highest since 2012 in Chicago. The gains were part of a sweeping rally across agricultural markets, driven by soaring Chinese imports, rising demand for crop-based fuels, and bad weather in global grain-growing regions.
Now, with U.S drought concerns still in sharp focus even as much needed precipitation aids growing corn, wheat, and soy, market variability is becoming the norm.
“The volatility we are seeing now is all about weather,” said Stephen Nicholson, a senior analyst for grains and oilseeds at Rabobank. “Over the last few weeks you just get whiplash from day to day.”
The recent slide across agricultural commodity markets could eventually trickle to store shelves, helping cool global food inflation worries.
Soybean futures in Chicago declined 6.7 percent to $12.5275 a bushel, the lowest since late December. The contract is down 4.4 percent for the year. Corn fell by the exchange limit, dropping 7 percent to $5.325 a bushel, the lowest since March.
A Bloomberg spot index of grains fell 5.9 percent on Thursday, its biggest decline since January 2009.
Corn, soy oil, and canola – all used as ingredients in biofuels – tumbled as the Biden administration prepares targets for “green” fuel blending with gasoline that the industry fears could be less than initially expected as oil refiners seek relief from compliance costs.
Still, with the proposed rules not yet released and several months left in the U.S. growing season, analysts said it’s too early to tell if the market has peaked.
Large crop traders expect markets to stay elevated for a few more years, driven partly by continued grains buying from China. On June 30, a U.S. Department of Agriculture report on soybean and corn plantings will be closely watched to see if high prices lured farmers to expand acreage.