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The potential emergence of La Niña later this year may disrupt the ongoing bearish trends in global wheat and corn markets. Prices for both cereals have hit four-year lows, but past La Niña events have significantly reduced harvests, especially in the US. Current projections indicate a moderate La Niña could emerge by October-December 2024, potentially driving prices higher if agricultural outputs are affected.

Highlights

ENSO Impact on Prices: The emerging La Niña, part of the ENSO cycle, could act as a catalyst for rising global wheat and corn prices, amidst the current bearish market conditions.

Current Price Trends: Wheat and corn prices on the Chicago Board of Trade are at a four-year low, with wheat at $5.24/bushel and corn at $3.80/bushel, reflecting over 20% decline year-on-year.

Previous La Niña Effect: The last La Niña (2022-23) led to significant drops in US corn (9.1%) and wheat (9.5%) production, underscoring the potential impact of another La Niña event.

La Niña Forecast for 2024: There is a 70% chance that La Niña will develop during October-December 2024, with a 50% probability of it becoming a moderate event, which could influence agricultural outputs.

US Production Outlook: The USDA has projected ample supplies for wheat and corn during the 2024-25 season, with expected increases in US corn production to 15.1 billion bushels, signaling a bearish market.

BMI Price Forecasts: BMI maintains a bearish outlook for both wheat and corn prices for the remainder of 2024, with wheat forecasted at an average of $6.05/bushel and corn at $4.30/bushel.

Conclusion

As global markets brace for the possibility of La Niña, wheat and corn prices remain under significant bearish pressure. While ample supply projections for the 2024-25 season suggest continued price declines, the unpredictable nature of La Niña could shift market dynamics. Should the weather pattern intensify, reduced harvests in key producing regions may catalyze a price rebound, warranting close monitoring in the coming months.

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