Corn and soybeans hit multi-year lows last April, among fears regarding lower demand for commodities during the pandemic. Since then, prices have increased by as much as 70-80% and are approaching historic highs. Looking at the US market, prices are still quite far away from record levels. For corn, there is a potential of 50% increase from the current 561 cents to 843 cents a bushel last seen in 2012. For soybeans, this is just over 25% from the current level of 1,400 to 1,780 cents a bushel. Is there a chance that both commodities will return to their record levels?
China is now on a buying spree. At this point, even the trade deal reached by Trump doesn't matter. China is continuing its strong economic recovery which goes hand in hand with further population growth, which of course needs to be fed. After problems with swine diseases in China in recent years, the situation is returning to normal, which generates a huge demand for commodities. Currently, US soybean and corn inventories are expected to drain to almost zero at the end of this season. Farmers point to lower sowing prospects, and it is possible that, like last year, they will again experience problems related to flooded fields that will prevent normal work. All of this can lead to new historic heights amid increasing inflation around the world. Already at this point, the CRB commodity index is very close to its historic peaks.
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CRB Food is only approx. 64 points away from it's all-time high. The price of corn is still far from its historic peaks, but further inflation signals coming from all sides should be positive for agricultural commodities. Source: Bloomberg
