RaboResearch Agri Commodities

The cocoa rally shows no signs of slowing, with the London March24 contract up 58% YTD. Meanwhile, the New York contract set a new all-time high in the first half of February, surpassing, in nominal terms, the previous record set in 1977. Since then, prices have moved 20% higher! In this podcast, we discuss the factors contributing to this unprecedented price rally. In our view, recent price action is fundamentally driven by systemic production issues in West Africa that have led to an enormous supply deficit, the third in a row. Current market dynamics are incomparable to prior seasons, thus creating enormous panic among market participants. 

Last Friday the USDA released a catalogue of data: the January WASDE, quarterly grain stocks, and Winter Wheat and Canola Seedings. The releases were largely bearish and confirmed the views held in our 2024 outlook (Buyers sail home on rising supplies) of higher-than-expected production and weaker demand. Consumers who have been disciplined are now being rewarded in terms of lower global G&O prices.

Join Rabobank's Agri Commodity Markets Research team for a deep dive into grain and oilseed markets. Since our bearish 2024 outlook was published on November 15, grain and oilseed prices have slid as bargaining power continues to shift from farmers to consumers.

North American 2023 grain harvests are set to outpace demand and pad stockpiles, encouraging funds to take on heavy short positions. The risk premium is now largely in soybeans and South America, where more conducive weather (Brazil) and politics (Argentina) promise to deliver large supplies in 2024 and beyond.

The October WASDE was viewed as a bullish report by the market, with corn, soy, and wheat futures all rising following its release. For corn in particular, it was higher old crop feed demand that caught the market by surprise. Meanwhile, for wheat markets, we saw 2023/24 estimations for both global production and trade trimmed.

Since the start of the year we have seen simultaneous rallies in sugar (+15%), cocoa (+28%), and robusta coffee (+47%). This is rather unusual given these three commodities have very different fundamentals and are produced in very different countries. The threat of El Niño-related weather challenges is the one common element that has led to speculators increasing their long bets across these three commodities. In this podcast, commodity analysts Paul Joules and Carlos Mera discuss the outlook going forward. 

With minimum alterations for most countries, the April WASDE's main talking point was cuts in Argentine production for soybeans, wheat, and corn amid the ongoing drought. As these cuts were expected, we saw little price action following the report's release. Eyes will now turn to next month's WASDE, which will provide the first estimates of the 2023/24 season.

Join Carlos Mera and Michael Magdovitz for a look at the year ahead in ACMR's latest podcast. 2022 held unprecedented volatility for agricultural commodity markets, from the Russian invasion of Ukraine to La Niña drought across South America. Consumers suffered through a third year of an agricultural bull market. It could very well be the last. Rabobank expects broad-based price relief in 2023 as weak consumer demand and more normal weather combine to revive supplies.

On the latest RaboResearch Agri Commodities podcast, Carlos Mera and Michael Magdovitz discuss the October WASDE report. Poor 2022/23 US grain and oilseed harvests are forcing the USDA to become increasingly adept with scissors. As it cuts production, the USDA must increasingly (and tragically) cut demand to prevent ending stockpiles from disappearing. Relative to expectations, the report was bearish on corn and bullish on soy, and it resulted in funds partially unwinding their corn/soy spread. The prime takeaway is that supply inflation is being increasingly controlled by weak, recession-linked demand.

In the latest RaboResearch Agri Commodities episode, Global Grains & Oilseeds Strategist Steve Nicholson joins ACMR Senior Analyst Michael Magdovitz to discuss the September WASDE. ACMR’s August WASDE Report predicted the USDA “may rue their bold move” to raise US soybean yields. Indeed, this week the USDA did a dramatic 180, cutting US soy (and corn) yields and reducing demand to avoid outright scarcity. A supply-side crisis will give corn and soybean bulls a strong foothold to climb higher – with Brazil as the primary near-term defense against desperate scarcity.