Economists at Capital Economics think that the prices of wheat, corn and soybeans will decline over the next six months owing to a rebound in global supply and slower demand growth in China.
Wheat, corn and soybeans to reverse most of the gains made since the beginning of the year
“We expect wheat global demand to rise this year as China pledged to reduce its reliance on imported animal feeds, such as corn and soybeans, in its latest Five-Year Plan. That said, we think that much of this boost to wheat demand will be offset by higher global production. The global wheat market surplus will increase in 2021/22 (June-May), which would boost already-high global end-stocks and weigh on the price. Accordingly, we forecast that the price of wheat will decline to 525 US cents per bushel by end-2021, down from around 660 cents today and its multi-year high of 774 cents.”
“We think that the price of corn will fall to 550 US cents per bushel by the end of this year, from 640 cents currently, for two key reasons. First, demand growth in China will probably slow as its hog herd is showing signs of stabilisation, but also because of its plans to increase its consumption of domestically-grown animal feeds, such as rice and wheat. Second, global supply should rebound soon as the high price of corn relative to other crops is likely to encourage planting.”
“We forecast that the price of soybeans will tumble to 1,000 US cents per bushel (from just over 1,500 cents today) by end-2021. Similar to corn, we expect demand growth in China to slow and global production to bounce back, which should be enough to swing the global market back into a surplus in 2021/22 (September-August) and boost stocks. That said, the recent dry weather in Brazil could further delay plantings, so the risks to our price forecast lie to the upside.”
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