Corn Prices Drop, But Looming Risks Could Trigger Supply Shock For Iowa
Agricultural markets have cooled in recent weeks, but experts warn the recent selloff in corn is overdone. Daryna Kovalska, a commodity strategist at BofA Global Research, told clients that while an interim peace deal between Washington and Tehran and sliding energy prices have cooled the market, risks have been deferred rather than eliminated. For Iowa farmers, this means depleted soil moisture and a massive new trade deal with China could quickly tighten supply and push prices higher.
Why did corn prices suddenly drop?
The Bloomberg Agriculture Spot Index has nearly reversed its recent gains. Sliding fertilizer and energy prices, combined with the Washington-Tehran interim peace deal, reopened the Strait of Hormuz and started a market normalization process.
Kovalska noted that agricultural markets underwent an aggressive positioning washout, with net speculative longs down 88% in just three weeks. Managed money flipped from decade-high longs to a net short by June 9. This pushed December 2026 corn prices down to a low of $4.40 per bushel.
“Corn sentiment has softened, as geopolitical and weather risks have eased. But risks have not disappeared; rather, they look deferred and could still trigger a supply shock,” Kovalska wrote.
How does the US-China trade deal impact corn?
The White House expects China to buy at least $17 billion of US agricultural products annually in 2026 and through 2028. Mirroring the Phase One trade deal, Kovalska's team believes US corn exports to China could surge from zero in 2025 to 5.5 million tons in 2026 and 16 million tons thereafter. While actual purchases have yet to begin, the implementation of this deal would materially tighten the US corn market and deliver a major win for American farmers.
What are the weather and fertilizer risks for Iowa?
Improved rains have eased weather risks, but threats persist. Nebraska, which accounts for 12% of US production, remains in severe drought with crop conditions 20% below average. South Dakota and Kansas ratings, representing another 12% of output, are at risk of deteriorating without sustained rainfall.
The Australian Bureau of Meteorology continues to warn of a historic El Nino event. Brazil's corn output could decline 10% year over year in 2026 and 2027. More importantly for Iowans, the state shows a pattern of sharply depleted soil moisture during similar El Nino analogues.
Fertilizer supply remains a global concern. Despite a potential US-Iran deal, the Strait of Hormuz still needs to be de-mined before operations fully resume. Timing is critical as Brazil's peak dispatch window approaches. Nitrogen imports are still down 15% year over year, putting first crop corn yields at risk of a 10% decline if Gulf urea shipments do not restart before the end of July.
Is the corn selloff permanent?
No. Kovalska remains constructive on corn, though she trimmed her 2026 upside target to $5.50 per bushel from $6.00. With the war-risk premium evaporating, lingering risks around weather, fertilizer flows, El Nino, and Chinese demand could still combine to tighten global supply and push prices higher again.
Will the US-China deal raise corn prices?
Yes, if implemented. The expected surge in Chinese purchases of US agricultural products would significantly increase demand. If corn exports to China reach the projected 5.5 million tons next year, the domestic market would tighten considerably, providing a strong foundation for higher farmgate prices.
