RaboResearch Agri Commodities

In this G&O market update we cover the main drivers leading price moves across Corn, Soybean and Wheat markets. The weather has begun to show a greater influence on G&O markets in recent weeks as corn and spring wheat crops move through key development stages. At the time of writing, CBOT Corn prices have eased after an initial rally following lower than expected US stocks and planted acreage and misplaced expectations of threatening weather in the Midwest. Meanwhile, CBOT Wheat prices have rallied as Russian winter wheat yields come in lower-than-expected and hot weather in the forecast is putting spring wheat crops at risk. CBOT Soybeans has mostly followed corn in recent weeks but as soybeans begin their key development stages, weather and Chinese export demand will be key.

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While the supply side is not without concerns, demand has been dropping due to Covid-19. For now, harvests are going ahead more or less normally in top producer Brazil and also in Colombia. We expect global demand to drop by 0.8% YOY, the first drop in global coffee demand since 1995. The precariousness of demand in certain coffee markets continues to be the focus of attention, particularly in markets where people are used to drinking tea at home and in markets with increasing unemployment but low benefits.

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Brent Crude recovered over 30% so far in May, pushing vegetable oil prices higher. Soy and corn remained subdued in the midst of an abundance of US stocks, good weather, and rapidly progressing US plantings. In particular for soybeans, the pace of Brazilian shipments continues to surprise, with the volumes of US soybeans bought by China a little lackluster in the middle of the worsening rhetoric. The rather positive USDA expectations for US 2020/21 soybean exports will require a strong commitment from China, but reading the Twitter feed offers no assurances about this. Good European and Black Sea weather in the forecast is stabilizing the prospects for wheat production, but there is still a long way to go before the situation improves.

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April witnessed unprecedented weakness in the energy sector and in emerging market currencies. Agri commodities markets were infected by these factors and continued their downward trend. Meanwhile, the threat of supply chains disruptions largely eased, as agricultural activities avoided major port and border closures, and the price risks shifted to demand destruction. Looking ahead, the spring plantings in the US are proceeding well but have the potential to bring volatility.

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Join the ACMR team as they discuss the wild ag commodity price swings amid market concerns for demand destruction and supply chain stability. For energy-related products like sugar, soy oil, palm oil, and corn, the energy price declines – resulting from Covid-19 and the internecine OPEC price war – are expected to cause substantial demand destruction for biodiesel and ethanol. For vital food and feed products like wheat, coffee, and soymeal, stockpiling and supply chain concerns are driving unusual strong backwardation.

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China G&O analyst Lief Chiang and ACMR analyst Michael Magdovitz discuss the spread of coronavirus and the threat it poses to already fragile Chinese and global feed demand. Lief and Michael then consider the implications of coronavirus on China's 'phase-one' trade deal compliance, US summer plantings, and CBOT Corn and Soybean prices through 2020.

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Brexit is anticipated to have far-reaching impacts around the world, with many industries – including sugar – feeling the effects. Charlie Clack and Maria Afonso join forces to see if Brexit could, however, also translate into opportunities for the world's major sugar exporters.

This podcast episode also appears on our sister podcast RaboResearch F&A Australia/New Zealand

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What does 'phase one' mean for US agriculture? Is it a return to normal, or is the old normal gone for good? RaboResearch grain & oilseed analysts Erin FitzPatrick and Steve Nicholson talk through some possibilities with Andrew Tasker from Rabobank's Markets team.

This episode originally appeared on our RaboResearch F&A North America sister podcast

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Arabica coffee prices rallied 40% in the last two months on the back of a frantic speculative rally. This is in sharp contrast to the low-price trend seen over the last two years, in which coffee prices traded below cost of production. Commodity analysts Carlos Mera and Andrew Rawlings discuss the reasons for the rally and where it may lead.

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