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CHECKING IN ON A FORGOTTEN CORNER OF COMMODITIES: AGRICULTURE

Metals have been on fire. That said, the overall environment for commodities has been both hot and cold.

Agricultural prices were hampered by ample global supplies in 2025. Indeed, since the global supply disruptions of 2022, which resulted in rapid price increases, grain prices have struggled.

Here is a chart of a composite of corn, soybean and wheat futures over the past six years or so.

"We believe ample global supply, driven by an easing of supply disruptions stemming from the Russia-Ukraine war and strong harvests in Latin America, are key culprits behind the broad weakness in agricultural prices," writes Mason Mendez, investment strategy analyst at the Wells Fargo Investment Institute (WFII), in a research note.

Mendez adds, "Weaker demand for U.S. exports amid U.S.-China trade tensions contributed to excess supplies in the short term and were strong headwinds last year."

Despite the U.S. federal government's announced $12 billion aid package for farmers, and China's promise to purchase more U.S. soybeans, WFII does not expect a material change in the global oversupply dynamic.

That said, Mendez does think that challenges impacting profitability could eventually spur U.S. farmers to cut back on supply growth in coming years.

He notes that the U.S. remains a key producer of agricultural commodities, accounting for 31% of global corn production, 28% of soybeans and 7% of wheat. Therefore, if U.S. farmers were to begin limiting output, Mendez says "it could be a tailwind for moderately improving prices and sector performance."

Weighing the uncertainties around U.S. farmers and future U.S. production against the headwinds of robust harvests elsewhere leads WFII to remain neutral on the agricultural sector, while it sees better opportunities in precious and industrial metals.

(Terence Gabriel)

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