Why Corn Prices Could Soar as Extreme Weather Affects Planting Season

By Crispus Nyaga

In recent weeks, the focus has been on the agricultural sector. The focus has been on the corn and soybeans sectors. This is partly because of the ongoing trade war and ongoing weather issues. On trade, the United States has been in a conflict with China, Mexico, and the European Union.

Almost a month ago, Donald Trump restarted the trade conflict with China after the trade talks broke down. He also went ahead and placed Huawei in the so-called Entity List. This measure prevents companies from doing business with the company. In return, China responded by announcing that it will stop buying soybeans from the United States.

Just last week, the Trump announced that the US will add tariffs to goods from Mexico. Mexico is a big buyer of American soybeans and corn. While Mexico has talked diplomatically if the tariffs go on, the country is expected to place tariffs on soybeans and other agricultural crops.

In addition to the trade war, there has been concern about the spreading African Swine Fever disease. This is a disease that was first reported in China in October of last year. Since then, millions of hogs have been culled. It has also spread in other parts of the world, especially in the southern Asia regions. Most of the soybeans China imports is used in feeding the hogs, which means that the demand could be weak.

Recently, the focus in the United States has turned to weather. In most parts of the country, the weather has been unconducive for planting corn. According to the US Department of Agriculture, this year’s cold and rainy spring has led to the slowest corn crop planting season in many places. In Michigan, 33% of the state’s acres have been planted, compared to the average of 73%. In Illinois, corn farmers are trying to get to the three-quarters planted mark. This is the slowest pace on record. In the Crop Progress Report released on Monday, the USDA said that 67% of the corn planting was complete, compared with the 96% five-year average. On soybeans, the USD pegged the planting completion rate at 39% vs 79% five-year average.

The news on weather should be bullish for both corn and soybeans. However, with all the other issues described above, there has been confusion on where the price will head to especially on the tariffs. As shown on the chart below, the price has eased a bit. In the days to come, there is a likelihood that the prices will continue moving higher as supply constraints continue.

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