Why grain prices are falling and what this means for producers

At a time when prices for many global commodities – including cocoa, sugar and olive oil – have risen dramatically, some key staples are actually becoming cheaper.

Grains – wheat, corn and even soybeans – are falling in price. This is due to a number of factors, but most notably the influx of new crops from Europe, the US and the Black Sea region.

“Apart from these recent monthly price drivers, the overall decline in grain prices over the past year was mainly due to a decline in wheat and corn prices, primarily due to the abundant supply and export of wheat from the Russian Federation and corn from Brazil, as well as strong competition from exporters in both the wheat and corn markets,” Erin Collier, economist at the Food and Agriculture Organization of the United Nations (FAO), told FoodNavigator.

Such price reductions have been occurring for some time. “The current decline in grain prices follows a broader trend and is not an outlier. While it is typical to see a seasonal price decline with the arrival of new crops and the start of a new marketing year, the ongoing decline is also due to high global production and weaker demand, especially from key buyers such as China,” Zanna Aleksahhina, grain analyst at market research firm Expana (formerly Mintec), told FoodNavigator.

Why are wheat prices falling?​

Prices of many important grains, including wheat, are falling. “Wheat futures prices continue to decline due to the influx of new crops from Europe, the Black Sea region and the US,” said Aleksahina.

The global wheat harvest forecast by the US Department of Agriculture (USDA) for July and August 2024/25, which is expected to reach 798.3 million tonnes for the season, has further reinforced the downward trend in these prices and surprised many market analysts.

The lack of demand from China has also led to a price increase.

Conditions in the United States and Canada are playing a key role in the decline in wheat prices. As major wheat producers and exporters, the two countries together account for about 22% of global wheat exports.

“Currently, favourable growing conditions in both countries are supporting expectations for large spring wheat crops later in the year. In Canada, although crop development is lagging somewhat in some areas, overall conditions are reportedly good and support prospects for a robust crop.

“In the US, the majority of the hard red winter wheat crop has been harvested, with about 90% of the crop harvested by mid-August, and reports indicate good quality. The soft white winter wheat crop is also progressing well, with about half of the crop already harvested.

“Total production in both countries is expected to exceed last year’s levels due to higher yields.”

FAO’s Collier reminded us that the importance and magnitude of the impact of crop conditions in any major exporting country on world prices depends on a number of important dynamics, such as global and domestic supply levels, global supply levels and macroeconomic dynamics.

Why are corn prices falling?​

In the corn market, prices are at their lowest level in four years due to significant short positions by fund traders.

This downward trend is partly due to the good weather conditions and again to lower demand from China.

The most serious problem, however, is the farmers' reluctance to supply grain. According to Aleksahina, they have the largest grain stocks since 1988, which is due to both high production costs and low prices.

According to the US Department of Agriculture's August report, global corn production is expected to reach 1.2 billion tons in the 2024/25 season, due to an increase in US production, which is estimated at 394.7 million tons.

Total production in other major exporters such as Argentina, Brazil and Ukraine has also increased significantly.

Together, Brazil and Argentina account for around 45 percent of global corn exports, and a record harvest in both countries could therefore put downward pressure on prices.

Soybean prices continue to fall​

Soybean prices continue to fall. Undeterred by recent events such as the floods in Rio Grande do Sul, Brazil, soybean prices on the Chicago Board of Trade (CBOT) hit a four-year low last week.

“The combination of ample supply and weak demand, underpinned by a pessimistic USDA report in August, is putting downward pressure on bean and oil prices,” Aleksahhina told us.

“Market participants have noted that U.S. exports are declining as major importers, particularly China, are opting to buy from Brazil, where a weaker currency makes soybean sales more competitive.”

For which types of grain are prices rising?​

However, all is not well in the world of grains. Although Indian rice prices fell slightly in July, they are on an overall upward trend. “I would say that Indian rice prices have been high for some time,” Aleksahhina told us. In January this year, they reached a 15-year high.

The reason for this, she explained to us, is the Indian government's trade restrictions in the form of bans and tariffs.

However, market participants said restrictions could be relaxed to avoid surpluses ahead of the new crop in October. The Indian government is considering allowing white rice exports with a fixed duty and replacing the 20 percent tax on parboiled rice exports with a fixed cess to prevent under-invoicing.

This, predicts Aleksahhina, could lower the price of Asian rice, a price reduction that would benefit West Africa and the Middle East, regions that, she told us, depend on Indian rice.