When and how fast corn and soybean prices will fall depends on the resolution of several global crises
Volatile corn and soybean prices seem to be something of a norm in recent years, with each new market-shaking crisis hitting right after the last. But what goes up must come down, and economists at the University of Missouri say a gradual decline in commodity prices should begin with next year’s crop.
According to long-term projections by the University of Missouri, corn prices should drop to US$5.22 per bushel after the 2023 harvest, and then gradually decline to US$4.37 per bushel by the end of 2028. Soybeans are expected to follow suit, hitting US$12.36 per bushel in 2023 and declining to US$11.22 per bushel over the next five years. But, of course, these estimates are contingent upon the weather, the war in Ukraine, and whether any further unexpected events arise, according to Patrick Westhoff, director of the Food and Agricultural Policy Research Institute at the University of Missouri.
The biggest wildcard in the mix, Westhoff said, remains the war in Ukraine. Not only has this limited supplies from a major world producer of food commodities, but it’s also contributed to massive spikes in the cost of fertilizer. Natural gas is the primary input required to make anhydrous ammonia, and energy shortages throughout Europe mean the cost of natural gas there is “astounding,” Westhoff said.
“In Europe, it doesn’t make sense to make fertilizer right now,” Westhoff said, and North American production capacity is maxed out. On top of this, he said, ongoing supply chain constraints continue to limit the movement of goods, so moving any surplus fertilizer that is created to Europe remains challenging.
Oil prices and biofuel policies in the U.S. could also prevent prices from declining, Westhoff said. Although not as likely to make the headlines, increasing soybean crush for biofuel production in the U.S. has also run up prices in recent years, and the U.S. Department of Agriculture is mulling revisions to its renewable fuel standard, Westhoff said.
On the flip side of the equation, the overall health of the economy — and whether the U.S. and the rest of the world enters a full-blown recession — could tip the scales toward a more rapid decrease in prices. And then there’s the question of what’s happening with imports into China. After causing global soybean prices in particular to surge with a massive increase in imports, China’s purchases of soy have fallen off dramatically in recent months. It’s not yet entirely clear what is driving that behavior — whether the surge in demand was a temporary effect of China’s recovery from African swine fever, whether the country was replenishing its stockpiles, or whether the nation is attempting to reduce its reliance on soybeans in animal feed after what appeared to be an initial shift toward more industrialized animal production and feeding.
“So we have a wide range of inputs, and we don’t expect those to revert to normal right away,” Westhoff said, “but we do think if we don’t have new shocks to the system that we could see some moderation in the years ahead.”