Corn price crosses ‘point of no return’ after the Russia grain deal

By:
on May 18, 2023
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  • Russia agreed to extend the black sea grain export deal by 2 months.
  • The deal is also in the interest of Russia because of its high inventories.
  • The world is seeing vast corn supplies this year.

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Corn prices crashed to the lowest level since December 2021 after Russia agreed to extend the grain deal. Data by TradingView shows that the price of corn slipped to a low of $5.72, continuing this year’s weak performance. Similarly, the closely-watched Teucrium Corn Fund (CORN) slipped to a low of $22.20, which was ~27% below the highest level in 2022.

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Russia extends Ukraine grain deal

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One of the biggest commodity news this week was the decision by Russia to extend the Ukraine Black Sea grain deal for two more months. The announcement now means that Ukraine will be able to ship commodities through the Black Sea. 

Ukraine and Russia are some of the most important countries in the grain industry. Data shows that Ukraine is the fourth-biggest corn exporter in the world after the United States, Brazil, and Argentina. Russia is the seventh.

Therefore, analysts believe that the world will be supplied well with corn this year. As I wrote in my article on wheat, extending the grain export deal is in the interest of Russia, which holds vast amounts of them in inventories. 

Further, many corn-planting countries are expected to have a mixed harvest this year because of the weather situation. Argentina, whose currency is plunging, is expected to have lower yield because of the heat in March. The same is true in Europe, Serbia, and Uruguay. On the other hand, Russia is expected to have a higher yield this year. The WASDE report said:

“Foreign corn ending stocks are lower mostly reflecting declines for Ukraine, the EU, Mexico, and Serbia that are partly offset by increases for Russia and Brazil. Global corn ending stocks, at 295.3 million tons, are down 1.1 million from last month.”

Corn price prediction

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Corn has been in a strong sell-off in the past few months. And on Wednesday, it managed to move below $5.8, which I view as the point of no return. It was the lowest swing in June 2022. 

Corn also dropped below the 50-day moving average while the Awesome Oscillator moved below the neutral point. The Relative Strength Index (RSI) has drifted closer to the oversold level.

Therefore, the path of the least resistance for corn is lower, with the next level to watch being at $5, which is ~12% below the current level. A move to $4.5 cannot be ruled out after that.

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