SINGAPORE/HAMBURG – Global corn prices hit a nine-month low on Monday, while wheat and soybeans also fell after the United States and Iran said they had reached an initial agreement to end the war and reopen the Strait of Hormuz.
The news caused a sharp drop in oil prices, weighing on agricultural products from grain to sugar, which are often linked to crude oil prices given their increased use in biofuel production.
The most active corn contract on the Chicago Board of Trade (CBOT) hit its lowest since August at $4.07-1/4 a bushel, wheat hit its lowest since April at $5.72-1/4, soybeans hit its lowest since February at $11.07-1/4 a bushel, while among soft commodities, the ICE raw sugar contract hit its lowest since April at $13.61 a bushel. per pound
“Today’s action is mainly related to the US-Iran deal, but there are some more bearish signals coming from the grain supply side,” said a Singapore-based trader.
The United States and Iran will sign a memorandum of understanding in Switzerland on Friday to end the war, end the U.S. blockade of Iran and reopen the Strait of Hormuz, a key chokepoint for oil shipments.
“If the Strait of Hormuz reopens, we can expect a sharp fall in oil prices, and other commodities such as grains are also likely to fall sharply,” a German trader said.
However, he added that the market remains volatile as the deal has not yet been signed and five days is a long time in the volatile Middle East.
“I think the market may remain wary until an agreement is actually signed,” he said.
As of 1047 GMT, CBOT’s most active corn contract was down 1.2% at $4.08 a bushel, wheat was down 1.6% at $5.75 a bushel and soybeans were down 0.4% at $11.08 to $11.08 a bushel.
The U.S.-Iran deal could generate new demand if the U.S.-Iran deal holds, a German trader said, as some importers postponed purchases to limit grain losses in hopes that it would push down grain prices.
