Corn prices forecast: fortune favours the brave

Corn prices, like other soft commodities, have come under fire in the past few months amid mixed supply and demand dynamics. Corn was trading at $$640 on Wednesday, 7.67% below the highest point in 2022. It has retreated by over 23% from its highest level in 2022.

Climate change and agriculture

Corn is one of the most important agricultural commodities in the world. It is used as both human and animal feed and as a valuable player in the energy market. In many countries, especially in the United States, corn is used in the manufacture of ethanol, which is a crucial part of the fuel mix.

Corn prices have dropped sharply in the past few months as supply and demand have been a bit balanced. A key reason for this is that Russia and Ukraine have reached several agreements to ensure that shipments from the latter get to market. This is a notable thing since Ukraine is the third-largest corn exporter in the world after the US and Argentina.

The bull case for corn has never been clear. For one, demand is expected to remain at an elevated level for a long time. The world’s population was just 3 billion people in the 1950s. Today, there are 8 billion people and the number will keep rising. Estimates are that there will be almost 10 billion people in 2050.

World’s rivers are drying

At the same time, there are serious concerns about future supply. In the past few years, the climate has been changing dramatically in most of the producing countries. In the US, the vital Colorado River is drying. Other rivers are not doing too well either. 

The same is true around the world. For example, in China, Yangtze river has seen its volumes drop to the lowest levels in years. In Europe, rivers like Rhine and Po are at their lowest levels. In 2022, Europe went through its worst drought in 500 years.

Many countries that produce a vast amount of corn are having more droughts recently. Therefore, I believe that there will be serious supply challenges in the future. The most recent WASDE report said:

“Global coarse grain production for 2022/23 is forecast 3.2 million tons lower to 1,439.6 million. This month’s foreign coarse grain outlook is for reduced production, consumption, and ending stocks relative to last month. Foreign corn production is down, with a decline for Argentina partially offset by increases for India and Paraguay.”

The war in Ukraine is going on, which means that exports from the country will fall to the lowest point in decades.

Corn price prediction

Corn prices have been in a strong downward trend in the past few months. It has managed to move below the key level at $636.9, the lowest point on December 6. Corn remains below the 50-day moving average while the Relative Strength Index (RSI) has moved close to the neutral point of 50.

Therefore, in the near term, there will be volatility in the market as investors assess the supply and demand dynamics. But in the future, corn prices will likely bounce back as demand outweighs demand.