Column: This week's CBOT corn, soy freefalls hard to match in recent years

4 minute read

Corn grows in a field outside Wyanet, Illinois, U.S., July 6, 2018. REUTERS/Daniel Acker/File Photo

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NAPERVILLE, Ill., June 23 (Reuters) - Chicago grain futures have gotten annihilated this week off the three-day weekend as recession fears build, U.S. weather forecasts improve and discussions on freeing trapped grain from Ukraine continue.

December corn futures are down more than 14% from last month’s highs and November soybeans have come nearly 11% off their early June top.

But how does this compare with other selloffs? Is this round worse than usual?

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CBOT December corn ended at $6.55-1/2 per bushel on Thursday, almost 94 cents off Friday’s high and down 10.3% for the shortened week so far, though it had traded down as much as 11.7%.

That 10.3% fall in December corn is the contract’s biggest three-day rout since May 12-14, 2021. Another larger plunge than this week’s occurred Aug. 12-14, 2019.

A severely underestimated U.S. corn crop stung the market in August 2019, and another supply misjudgment and profit-taking off multiyear highs pushed down prices in May 2021. December 2021 corn briefly rose near the May highs a month later, though futures clawed back only 70% of the way in 2019.

Three-day falls of 10% or more in December corn happened in 2016, 2009 and 2008, the latter several times late in the year as the onset of recession sent global commodity prices plummeting.

Large speculators’ bullish corn positions in mid-May 2021 were nearly identical to this year’s, but the August 2019 selloff marked funds’ crossing from bullish to bearish territory, where they stayed until September 2020.

Thursday’s close in December corn was still above the 2021 high and well above the year-ago $5.36 per bushel. The 38-1/4-cent daily decline exceeded what would be a limit move in many years.

July corn futures have dropped nearly 5% this week, though the July-December corn spread firmed Thursday to 91-1/4 cents per bushel, suggestive of continued tightness in nearby supplies. That is the largest old-new crop premium since early March.

Chicago corn futures with simple moving averages

SOYBEANS

Unlike in corn, November soybeans are trading well below the 2021 high of $14.80 per bushel, though futures were about $13 on the same date a year ago. The contract finished at $14.15-1/2 on Thursday after reaching the lowest levels since April 4.

That puts weekly losses so far at 7.9%, almost identical to the three-session decline in November 2022 futures for the period ended June 17, 2021. That day also featured the largest selloff in front-month futures outside a delivery period, and the November 2021 contract plunged 10.2% over the three sessions.

Aside from the June 2021 carnage, the last time November soybeans dropped more than this week in a three-day period was 9.9% in early July 2016 on favorable U.S. weather forecasts coming out of the Fourth of July weekend.

A notably large soybean decline also occurred over the three sessions ended July 1, 2014, as the U.S. government’s June 30 stocks and acres reports were both the most bearish ever for soybeans. A good weather forecast helped, too.

It is still a bit early to get comfortable forecasts for corn pollination and particularly rains for soybeans, which are most important in August, but a favorable post-July 4 forecast could present more downside risks for grains. That is why corn ended limit-down in the session coming out of July 4, 2021.

Money managers continued holding a relatively large net long in CBOT soybean futures and options as of June 14, though funds were lightening bullish bets a year ago. Mid-June 2021 selling was the strongest since early 2020.

July soybean futures had reached $17.84 per bushel on June 9, just 5 cents from the most-active contract’s all-time 2012 high, though they settled on Thursday almost $1.91 off the June 9 top.

Old-new crop soybean spreads, like corn, maintained strength despite the selloff. Thursday’s July-November premium of $1.77-3/4 per bushel aligns with levels of recent weeks.

Chicago soybean futures with simple moving averages

Karen Braun is a market analyst for Reuters. Views expressed above are her own.

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Editing by Matthew Lewis

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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

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As a columnist for Reuters, Karen focuses on all aspects of the global agriculture markets with a primary focus in grains and oilseeds. Karen comes from a strong science background and has a passion for data, statistics, and charts, and she uses them to add context to whatever hot topic is driving the markets. Karen holds degrees in meteorology and sometimes features that expertise in her columns. Follow her on Twitter @kannbwx for her market insights.