(The opinions expressed here are those of the author, a market analyst for Reuters.)

NAPERVILLE, Illinois - It is not the agricultural market setup one might anticipate: speculators are ending the year long corn just after U.S. farmers smashed the old yield record.

But that is precisely where we are as 2024 comes to a close.

Meanwhile, Chicago soybean futures dropped to four-year lows this week with a massive Brazilian harvest on deck, yet wheat futures are hovering near recent lows despite a tight global market.

So how did we get here?

BULLISH FUNDS

As it sits now, U.S. corn yield in 2024 topped last year’s record by 3%. But domestic corn supplies by August 2025 are seen shrinking slightly on the year, against preliminary estimates suggesting a 17% rise.

Lower corn prices have been stimulating demand all year, causing speculators to go from record bearish CBOT corn bets in July to bullish ones by November as U.S. stocks dwindled. As of mid-December, funds’ net long was the biggest in nearly two years.

This bullish position is uncommon for speculators off a near-record U.S. crop, and it is also abnormal for their optimistic corn views to oppose their pessimistic soybean and wheat ones so heavily. This will be a key dynamic to watch heading in to 2025.

WEAK PRICES

Most-active CBOT corn, wheat, soybeans, soybean meal and soybean oil futures all hit four-year lows within the last few months, officially ending the multiyear rally that began around August 2020.

Soybeans and soymeal have taken the biggest hit. Soybeans have lost 26% so far this year, which would be the biggest annual decline in two decades but similar to 2014. Meal has fallen by a similar degree.

Both 2014 and 2024 were characterized by huge annual jumps in global soybean output without an equal rise in consumption.

Annual losses in corn and wheat were much worse in 2023 than this year as current supplies are not considered burdensome. The easing in soybean oil was also more prominent last year.

VEGOILS: SOY VERSUS PALM

Palm oil is the world’s most plentiful vegetable oil, but it has been more expensive than rival soybean oil for the last four months. This unusual discount of soyoil to palm oil reflects a shifting dynamic in vegoils.

Palm oil production skidded over the last year and the market hopes for recovery into 2025. At the same time, top producer Indonesia continues increasing palm’s use as a biofuel, trimming exportable supplies.

Soybean oil’s cheapness is not only reflective of huge global soybean output and processing volumes, but also its relatively disappointing use rates in U.S. biofuels, especially as it competes with cheaper feedstock imports, such as used cooking oil.

U.S. SOY TRADE WITH CHINA SLIPPING

U.S. soybean exports to China in 2023-24 were a four-year low, and sales to China for 2024-25, which began on Sept. 1, are not looking good. That volume sits below both year-ago levels and recent mid-December averages.

Further, only 46% of 2024-25 U.S. soybean sales so far are to China, the lowest non-trade-war share in 18 years. China’s decreasing reliance on U.S. soybeans, which are among the top U.S. products of any kind exported to China, should be alarming for U.S. agriculture.

Not only is Chinese demand somewhat stagnant, but top exporter Brazil has had sufficient supplies to cover China’s needs. Next month, Brazil will start harvesting what is expected to be a record soy crop, up more than 10% on the year.

LOW WHEAT SUPPLIES = LOW PRICES?

By mid-2025, wheat stocks-to-use among major exporting countries are set for 17-year lows. But Chicago wheat futures on Thursday were at six-year lows for the date.

The problem is that this multiyear low forecast in major exporter stocks-to-use has been a recurring theme for at least a couple of years. This suggests that despite tighter supplies, global wheat needs are being met sufficiently.

Much of that owes to soaring export volumes from top supplier Russia, which has increased the share of its total crop it exports, keeping prices notably cheaper versus its competitors.

However, Russia’s winter grains are reportedly in their worst-ever shape. If the winter provides no recovery, the struggling crop could jolt the wheat market in the spring when it emerges from dormancy. Karen Braun is a market analyst for Reuters. Views expressed above are her own.

(Writing by Karen Braun Editing by Matthew Lewis)