How High Can Grain And Oilseed Prices Rise?

The agricultural products that feed the world have been on quite a run to the upside in 2021 and 2022. Soybean and corn futures came within a stone’s throw of the 2012 all-time highs, with prices rising to more than $17 and $8 per bushel, respectively. The world’s most political commodity – wheat – moved to a record peak, eclipsing the previous all-time high seen in 2008.

Each year is an adventure in the agricultural markets. As the global population grows, the world requires more beans, corn and wheat to satisfy requirements. In 2022, it will take more bushels to feed the world than in 2021. And it will take even more again in 2023. The weather is typically the primary factor for prices. Drought, floods or other adverse weather events that reduce crop sizes cause prices to rise, while bumper crops are bearish. Meanwhile, 2022 is anything but an ordinary year in the agricultural markets as supply-chain issues, inflation, the potential for a recession, the war in Ukraine and other factors make Mother Nature an afterthought for prices.

Grain and oilseed futures have pulled back from the recent highs, which could be the perfect opportunity to hop on board a very bullish trend with fundamental winds behind their sails. The iPath® Bloomberg Grains Subindex Total Return ETN (OTC:JJGTF)) moves higher and lower with grain and oilseed prices.

The seeds for the 2022 North American crops are now in the ground. On May 12, the U.S. Department of Agriculture released its May World Agricultural Supply and Demand Estimate report. The monthly WASDE is the gold standard for fundamental data on the commodities that feed the world.

I reached out to Sal Gilberte, the founder of the Teucrium family of grain and oilseed ETF products, including the Teucrium Corn Fund (NYSE:CORN), Teucrium Wheat (NYSE:WEAT) and Teucrium Soybean (NYSE:SOYB) ETFs.

Gilberte’s take on the latest WASDE report:

“The May WASDE is important because it gives the first official look at next year’s crop estimates. Attention to this year’s report is heightened due to the uncertainties injected into global grain markets by Russia’s invasion of Ukraine. That said, the USDA did the expected regarding Ukraine and issued estimates in line with what has generally been reported as official Ukraine estimates concerning their own farming sector.

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“It looks like the USDA may have underestimated Russian wheat production and is still overestimating Brazilian soybean production for the current crop year. Most significant in this entire report, in terms of specific estimates, is the yield reduction for U.S. corn of nearly four bushels an acre below trend line; even with current weather issues it is probably too early to call for such a substantial reduction in yield, especially given the large number of estimated planted corn acres – any revisions in yields from this point forward will have major impacts to market expectations and price volatility.

“The report is overall supportive to the grain sector because it again confirms tightening global grain balance sheets relative to five- and 10-year historical norms, but we are in a seasonal time period when grain market prices often plateau, which could limit upside potential from here, barring substantial weather issues as the growing season progresses. Expect the elevated level of price volatility in grain markets to continue for the remainder of the year as weather and geopolitical events continue to unfold.”

Gilberte cautioned that the uncertainty over the weather and crop is peaking in May, and we could see price corrections. However, 2022 is far from an ordinary year for agricultural products, as inflation, supply-chain issues and the war in Europe have pushed prices to multi-year or all-time highs over the past weeks and months. The trends in the soybean, corn and wheat markets remain bullish. The full text of the May WASDE report is available via this link .

Soybeans are critical ingredients in many human foods and animal feeds. Aside from cooking oil, soybean oil is also required for biodiesel fuel production.