BofA Predicts More Weakness for Grains and Soybeans
BofA has released an update on the grain and soybean market, highlighting that the demand for grain imports is weak and that a recovery is not expected in the near term. Global grain demand for 2024/25 is anticipated to remain weak, beginning the season with disappointing import figures, particularly from China. In a note from UBS, it was stated, "Global corn imports took a significant hit due to the dramatic decline in Chinese imports at the start of the season, and even strong purchases from Mexico could not offset this," adding that wheat demand has weakened further due to import restrictions in Turkey.
Due to unusual pricing dynamics this season, competition among grain-exporting countries is intensifying. The fact that U.S. corn is the cheapest, combined with falling wheat prices in Argentina, indicates an overwhelming global supply. The completion of the harvest in the Northern Hemisphere is expected to bring more grain availability, especially for corn.
As weather-related risks begin to diminish, grain prices are losing support. Markets are expected to remain directionless, with wheat prices hovering in the $5-6/bushel range, while corn prices appear to be on a downward trend. The wheat-corn price differential is projected to rise from $1.2/bushel to $1.7/bushel by the end of the season.
BofA maintains a negative stance on soybeans due to the lack of upward catalysts. The combination of a potential record crop, delayed demand, and possible post-election U.S.-China trade tensions contributes to this outlook. Additionally, the threat of La Niña affecting prices is reducing.
From a macroeconomic perspective, BofA economists forecast a 3.3% increase in global GDP for 2025 and 2026. Wheat prices are expected to average $5.5/bushel in 2025, while intense competition is anticipated due to declining export opportunities from major countries and shrinking global imports. For corn, record production is expected to boost U.S. stocks, with prices anticipated to average $4/bushel in 2025.
Global soybean production is expected to hit a record 426 million tons in 2024/25, with prices forecasted to average $9.7/bushel. Soybean meal production is expected to exceed consumption, with prices predicted to remain weak at around $300/ton for 2025. Increased production of soybean oil may be affected by regulatory changes and import duties, with prices expected to average 39 cents per pound.