Corn price plunge gains steam ahead of WASDE report

It keeps getting worse for some agricultural commodities amid an ongoing demand and supply mismatch. Corn price continued plunging this week and is now sitting at its lowest point since 2020. It was trading at $425, down from its pandemic high of $825. 

The next important catalyst for corn and other agricultural commodities will be the upcoming World Agricultural Supply and Demand Estimates (WASDE) report by the USDA. The monthly report will come out on Thursday and provide investors with more colour about the state of the industry.

The most recent report said that the corn industry was seeing strong production, helped by good weather in some countries. In all, the report estimated that production would get to over 15.3 billion bushels, a 108 million increase. It estimated that corn demand would jump by 75 million to 14.6 billion bushels.

Therefore, the industry is going through a significant supply surplus, which is affecting prices. Some of the countries driving the sharp increase in corn production are China, India, and Paraguay. Most of these countries have increased the acreage of corn and have received good weather in the past few months.

The other important catalyst for corn prices is the ongoing US election since the country is one of the biggest producers in the world. This election is important because the outcome will determine the country’s agricultural policy.

Joe Biden has been relatively good for the agricultural sector by avoiding Trump’s trade wars. Trump was seen as being bad for farmers because his trade wars pushed big buyers like China to boost local production and look for alternative sources. Trump has now pledged to boost tariffs in a bid to reduce the country’s trade deficit, which has continued widening in the past few years.

Meanwhile, there is a likelihood that Ukraine will boost corn production this year as a sense of peace in some of the biggest producing areas.