Citigroup Sees Upside for Grain Prices Amid Super El Niño and Black Sea Disruptions

Citigroup's chief analyst team has raised price targets for corn, wheat, and soybeans due to four converging factors that will continue to tighten global agricultural supply-demand balances. The factors include an intensifying Super El Niño event, escalating Black Sea shipping disruptions, expanding biofuel demand, and elevated fertilizer and energy costs.

The team led by Arkady Gevorkyan noted that rising grain and oilseed prices will ultimately feed through to food inflation, particularly affecting import-dependent economies. This makes agricultural markets increasingly important for broader inflation-focused investors.

Super El Niño represents Citigroup's highest-conviction agricultural supply risk, with a 69% chance of surpassing the intensity of all El Niño events since 1950 during the October-to-December period. The team estimates potential yield losses by incorporating factors such as country-level production shares, yield sensitivity to ENSO, and crop calendar severity.

The report also highlighted the impact of Black Sea disruptions, with Russia's primary export hub at Novorossiysk damaged and Ukraine's port infrastructure around Odesa intensified. Citigroup estimates that the current disruption could delay or displace 10-20 million tonnes of wheat exports, equivalent to 5-9% of global wheat trade.