After reaching record and multi-year highs in 2022, grain and oilseed futures prices plunged. The Chicago Mercantile Exchange’s soft red winter wheat, corn, and soybean futures markets are the leading agricultural product hedging, speculative, investment, and trading markets.
The USDA’s latest November World Agricultural Supply and Demand Estimates Report indicated ample supplies to meet global requirements after the 2024 crop year. However, each year is a new adventure for the grain and oilseed markets, which feed and increasingly power the world. The weather across the fertile growing areas worldwide is the primary factor determining the path of least resistance of prices.
Meanwhile, Russia and Ukraine are significant grain-producing countries, and the Black Sea Ports is a critical logistical hub. Russia’s 2022 invasion of Ukraine caused corn and soybean futures prices to rise to within pennies of the 2012 record highs. CBOT wheat futures rose to a record peak in 2022. Since then, ample supplies have caused prices to plunge to levels that could create opportunities in 2025 as the war continues to rage, and the favorable weather conditions in 2024 do not guarantee the same for 2025. As grain and oilseed futures are now in the offseason before the 2025 crop year, which begins with planting in early spring, it could be the perfect time to start accumulating grain and oilseed exposure on a scale-down basis.
Soybeans fall to attractive prices
- The continuous CBOT soybean futures contract reached a high of $17.5925 in Q1 2022, just 29.75 cents below the 2012 all-time high.
- Nearby soybean futures were just below $10 per bushel in mid-November 2024.
- While soybean futures have plunged, the long-term trend reflects higher lows since 1999.
- Technical support on the long-term chart is at $7.91 per bushel.
Corn prices halve
- The continuous CBOT corn futures contract reached a high of $8.2450 in Q2 2022, just 24.50 cents below the 2012 all-time high.
- Nearby corn futures were below $4.30 per bushel in mid-November 2024.
- Technical support on the long-term chart is at $3.09 per bushel.
Wheat plunges
- The continuous CBOT wheat futures contract reached a record $13.6350 high in Q1 2022.
- Nearby CBOT wheat futures were just below $5.50 per bushel in mid-November 2024.
- While the soft red winter wheat futures have plunged, the long-term trend reflects higher lows since 2016.
- Technical support on the long-term chart is at $3.8675 per bushel, the 2016 low.
The reasons to consider grain and oilseed exposure for 2025
- The demand side of the fundamental equation for oilseeds and grains is increasing with population growth. Producers must keep pace with rising demand to meet worldwide requirements.
- As the world addresses climate change, soybeans are a critical ingredient in biodiesel fuel.
- Corn is a crucial ingredient in ethanol, a leading biofuel.
- Wheat is the primary ingredient in the bread that feeds the world.
- Inflation has caused production costs to increase.
- The ongoing war in Ukraine can impact crop production and pose supply threats as the Black Sea ports are a leading logistical hub.
- Prices have declined to levels that offer value.
The futures, ETFs, and stocks that will track grain and oilseed prices
- Soybean, corn, and soft red winter wheat futures and futures options trade on the Chicago Mercantile Exchange’s CBOT division.
- The SOYB ETF product tracks the performance of three liquid CBOT soybean futures contracts.
- The CORN ETF product tracks the performance of three liquid CBOT corn futures contracts.
- The WEAT ETF product tracks the performance of three liquid CBOT wheat futures contracts.
- The Invesco DB Agriculture Fund (DBA) is exposed to the CBOT soybean, corn, and wheat futures. DBA is also exposed to the most liquid animal protein and soft commodity agricultural futures.
Grain and oilseed futures have declined, while many other commodity prices have moved higher. As the worldwide demand for agricultural commodities rises and addressing climate change increases the energy requirements for some of these products, the current prices could be close to significant bottoms. Accumulating grain and oilseed exposure on a scale-down basis could be the optimal value approach for 2025.
Thanks for reading, and stay tuned for the next edition of the Tradier Rundown!