BofA has provided an update on the grains and soy market, highlighting that grain import demand is weak and may not see a recovery anytime soon.
The 2024/25 global grain demand is expected to be feeble, with the season starting off with disappointing import figures, especially from China. "Global corn imports took a big hit due to a dramatic decline in China imports at the start of the season that even strong Mexico purchases couldn’t offset," the note from UBS said, adding that wheat demand has further weakened due to import restrictions by Türkiye.
The competition between grain-exporting nations is intensifying as the price dynamics have shown unusual patterns this season. With US corn being the cheapest and Argentina's wheat prices plummeting, the implication is an overwhelming global supply. The Northern Hemisphere's harvest completion is expected to bring even more grain availability, particularly for corn.
Grain prices are losing support as weather risks begin to fade. The markets are anticipated to remain directionless and range-bound at $5-6/bushel for wheat, with corn prices looking bearish. The wheat-to-corn price spread is projected to increase from $1.2/bushel to $1.7/bushel by the end of the season.
BofA maintains a bearish stance on soybeans, citing no upside catalysts. The combination of potential record crops, lagging demand, and possible US-China trade tensions post-elections contribute to this outlook. Additionally, the threat of La Niña affecting prices is diminishing.
In terms of the macroeconomic outlook, BofA's economists predict a 3.3% rise in world GDP for both 2025 and 2026.
Wheat prices are forecasted to average $5.5/bushel in 2025, with export availability from major nations expected to fall, leading to intense competition as global imports contract.
For corn, a record crop has built up US inventories, and prices are expected to average $4/bushel in 2025.
Global soybean production is forecasted to hit a record 426 million tons in 2024/25, with prices averaging $9.7/bushel.
Soybean meal production is set to outpace consumption, leading to weak prices forecasted at $300/ton for 2025, while soybean oil production increases may be impacted by regulatory changes and import duties, with prices expected to average 39 cents/pound.
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