Why are corn, soybeans, sugar, cocoa, and wheat prices tumbling?

Agricultural commodities are having another difficult year as the market remains in an era of abundance. Sugar price was trading at $18.65, down by over 33% from its highest point this year and is hovering near its lowest point since November last year.

Corn, on the other hand, has tumbled to its lowest level since October 2020. It has dropped by over 52% from its highest level in 2023. Soybeans prices have fallen to $1,058, down by 33% from its highest point this year and is at its lowest point since November 2020.

Even cocoa, whose price stunned the market earlier this year, has moved into a deep bear market. It has dropped by over 35% from the year-to-date high.

Commodities like corn, wheat, and soybeans are falling even as the war in Ukraine escalates. While the Black Sea grain deal ended, the two countries are still exporting substantial grains through the region.

Recent data showed that Ukraine was exporting over 5 million tonnes of grains per month, higher than what it was exporting in 2023. While these numbers are lower than what the country was exporting before the invasion, they are moving in the right direction.

Ukraine has achieved this success by focusing on farming in the western side and by establishing new routes.

In a recent statement, the US Department of Agriculture (USDA) announced that corn exports from Ukraine will continue rising this year

These commodities have also slumped because we are living in an era of abundance in the agricultural sector. According to the USDA, global corn production for the 2024/25 season is expected to be 1.2 million tonnes higher than previously thought. It expects that the total production will be 1.52 billion, with Ukraine and the US leading the way.

The same trend is happening in the wheat market, which will be characterised by larger supplies and ending stocks. Wheat production will rise by 134 million bushels to 2,008 million bushels as the harvested area acreage rises.

Other countries like Canada and Pakistan are expected to see higher wheat production, which will be offset by a drop in Russian output because of the recent frost damage.

Meanwhile, soybean production in the US is expected to drop by 15 million bushels to 4.4 billion. Globally, soybean production will continue rising, helped by China and Brazil.

The same is happening in the sugar market, where the US supply will rise by over 304,000 short tons. Other countries seeing more sugar supply are Mexico and India. At the same time, India has continued its sugar export ban.

The main reason why the cocoa price has tumbled is that hedge funds have scaled down their bullish bets on the commodity after it surged earlier this year.

There are also concerns that cocoa production will start rising in the coming months. The challenge for cocoa is that ramping production is usually not possible because cocoa trees take many years to grow.

Soybeans and corn prices will also be impacted by the ongoing US presidential campaign. Recent data show that Donald Trump could lose the election to Kamala Harris. A Predict It poll shows that Kamala has a healthier lead against Trump.

Trump is widely seen as a negative candidate for the agricultural market. One of his campaign pledges is to impose substantial tariffs on Chinese goods in a bid to deal with the US trade deficit.

As we saw in his first term, China responded to his tariffs by targeting the agricultural sector in the US. This was a good strategy because most agricultural states tend to lean Republican and that China is the biggest buyer of these commodities.

The last trade war had another important impact on the agricultural sector. China has boosted purchases from other countries like Brazil and Argentina. It has also invested huge sums of money in boosting its local production.

There are chances that the prices of key agricultural products will continue falling further in the near term. A good example of this is corn, which as shown below, has been in a steep sell-off after peaking at $825 in 2022.

Corn has continued making lower lows and lower highs this year. It has also dropped below the important support level at $410, its lowest level in February this year. Corn remains below the 5-day and 200-day moving averages.

Therefore, the path of the least resistance for corn is downwards, with the next point to watch being at $350. The same trend is happening across other agricultural commodities like soybeans, wheat and sugar, meaning that the trend will continue. I believe that the recovery will happen, possibly after the US election.

Tags: Ukraine, cocoa, corn, agricultural commodities, price, sugar, soybeans, Pakistan, Canada, Production, wheat, output, Market