Bloomberg Intelligence
This analysis is by Bloomberg Intelligence Senior Commodity Strategist Mike McGlone, with contributing analysis by Jason F Miner. It appeared first on the Bloomberg Terminal.
A supply shock may be needed for higher corn, soy, wheat prices
In the absence of a poor Corn Belt growing season, there may be little to stop crude oil’s deflationary path from trickling down to the grains in 2025. Record-setting South American production and exports, particularly of soybeans, put corn in the forefront, and we see price risks leaning below $4 a bushel vs. staying above $5.
Downward trend: Weather, short-covering bounces
Corn, soybean and wheat prices appear more likely to decline than rise into year end unless there’s a Corn Belt drought. Prices may return to 2019 levels following the biggest money pump in history and Russia’s invasion of Ukraine, which seems to be the primary driving force. The overhang from that unique price-spike combination, which fueled supply elasticity, is evident in our chart showing corn’s inability to stay above $5 a bushel, with the 2019 $3.85 average as a potential gravity-pull level.
Consensus for about 181 bushels of corn per acre vs. the five year average near 178, and roughly 95 million planted acres (about 6% above 2024), might be ambitious for 2025 production. Weather scares could test corn and soybean resistance around $5 and $11, along with some covering risk from net-short managed money positions.
Soybeans, grains could be akin to 2018, before fall
The overhang for soybean and grain prices may be similar to 1H18, which marked a peak until 2020. A sharp spike in futures open interest to a record has characterized 2025, like seven years ago. What’s different is the big jump in production and exports from Brazil, particularly in soybeans. The graphic shows the oilseed at about $10.60 a bushel on May 27, not far from the same date in 2018, while corn, soybeans and wheat open interest have backed down from February records. Our take is that new-long enthusiasm may have a similar outcome. In 2019, soybeans bottomed at about $7.90 a bushel due to trade issues.
Record soybean exports this year, at around 117 million metric tons from Brazil and Argentina, are about 50% higher than in 2018 and more than double that of the US. A lowprice cure may come near 2019’s $8.92 average.
Grains may follow falling crude oil in 2025
WTI crude oil’s inability since April to stay above 2024’s $65 a barrel low may have similar deflationary implications for the grains. Roughly unchanged in 2025 to May 27, the Bloomberg Grains Spot Subindex faces a supply overhang from South America, declining demand from China, falling crude prices and a significant increase in US plantings of the world’s most important grain — corn. Decent demand from Mexico and a weakening dollar are minor factors compared with the potential for a Corn Belt drought to support prices.
Our bias is with the low probability for a Corn Belt supply shock vs. the potential for another good production year, backed by the trend of superabundance in oil and liquid fuels continuing to pressure prices. Absent a drought, legislation to buttress biofuel demand or exports may help buoy the grains.
Crude’s deflation from inflation may trickle down
Crude oil is in a deflationary cycle following an inflation spike, and if the pattern since 1990 is a guide, $40 a barrel is a likely low-price cure. Staying above 2024’s nadir of $65 may be an initial sign of recovery. Rising supply excesses from the US and OPEC, along with declining demand from China, are top headwinds. However, it’s the potential for the US stock market’s downward reversion that might matter the most. Our graphic shows the stretched S&P 500 vs. MSCI World Ex-US index, which may keep reverting from last year’s 2.6x peak. From 1969-2014, this ratio of US stocks vs. the world stayed below 1x.
Declining oil prices vs. record-setting gold is a global recessionary trajectory and if US equity prices continue to retrace some of the past decade’s outsized gains, deflation from the inflation may dominate.
Unknowns expanding around downstream demand
US crops are mostly planted and looking strong, while China’s temporary pause on steep tariffs may improve chances that crop exports aren’t severely reduced. Scrutiny of crop chemicals was largely tabled until 2026 in an initial report from the MAHA Commission (which emphasized the importance of US farms’ success). Yet a focus on ultra-processed foods could foreshadow greater disruption to grain and oilseed markets.
Downstream, the results of our GLP-1 survey are ominous for food demand, with many Americans eliminating an entire daily meal and portion sizes falling. A large volume of small refinery exemptions clouds biofuels, which await the EPA’s new volume obligations. Biofuel tax credits are part of the “big, beautiful bill” now in Congress. Yet detailed regulations remain months away.
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