Another escalation in tension in the Ukraine – Russia conflict occurred with the Biden administration approving the use of US long-range weapons. The rapidly changing situation in the Black Sea continues to create uncertainty in global economic trade, especially for agricultural commodities. As a result, we are starting to see some war risk premium built into prices.
Yet for all this, I see global prices remaining on the low side. The past week
had been pretty brutal with a slide in futures and a strengthening USD,
weakening FOB values across the globe.
Due to our proximity to markets, even at current values, Aussie ASW is
pricing into SE Asia, but only just. Brazilian wheat and US SWW are also attracting demand into feed markets in Korea and Vietnam. We can
also expect tough competition from Argentina in these markets as they are expected to be aggressive sellers to bring
in some much-needed cash into their economy.
Geopolitics continues to weave its web in commodity trading. China is
forging closer ties with Brazil with regards to agricultural goods. Since the
previous trade disputes in 2017, Brazil has surpassed the US as the preferred trading partner
for soybeans. As an example, China purchased 8mmt of soybeans in October, 1.36mmt from Argentina, 514kmt from the US and the balance from Brazil.
At the recent G20 meeting, China quietly signed an agreement between the two countries designed to strengthen ties (read more here). The deal includes a range of agricultural products, tech sharing and
opening the road for extra foreign investment. This way China is already
looking to sidestep any potential US export tariffs aimed at them.
Russia is looking at implementing an export quota from Feb through to
June. It is unsure what the actual cap will be, but it is thought that the Kremlin is looking to try and keep exports
through this period to around 10mmt, compared to the 29mmt exported last year.
Next week
The market is watching the situation in the Black Sea very carefully. The limited upside in CBOT to date could be tested should supply routes be threatened.
Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published
Listen to the podcast
Join the Mecardo team for the Commodity Conversations podcast, where we provide short weekly market recaps and longer conversations with guests to discuss the drivers and trends in livestock, grain and fibre markets.
Our team of market analysts are recognised as leaders in Australian Ag market analysis, providing invaluable insights to help you navigate the ever-changing commodity landscape.
We don’t just bring you the most up to date market insights. Find out more about Mecardo’s services including risk management advisory, modelling, benchmarking, research & consultancy.
Black Sea front and centre again
Yet for all this, I see global prices remaining on the low side. The past week had been pretty brutal with a slide in futures and a strengthening USD, weakening FOB values across the globe.
Due to our proximity to markets, even at current values, Aussie ASW is pricing into SE Asia, but only just. Brazilian wheat and US SWW are also attracting demand into feed markets in Korea and Vietnam. We can also expect tough competition from Argentina in these markets as they are expected to be aggressive sellers to bring in some much-needed cash into their economy.
Geopolitics continues to weave its web in commodity trading. China is forging closer ties with Brazil with regards to agricultural goods. Since the previous trade disputes in 2017, Brazil has surpassed the US as the preferred trading partner for soybeans. As an example, China purchased 8mmt of soybeans in October, 1.36mmt from Argentina, 514kmt from the US and the balance from Brazil. At the recent G20 meeting, China quietly signed an agreement between the two countries designed to strengthen ties (read more here). The deal includes a range of agricultural products, tech sharing and opening the road for extra foreign investment. This way China is already looking to sidestep any potential US export tariffs aimed at them.
Russia is looking at implementing an export quota from Feb through to June. It is unsure what the actual cap will be, but it is thought that the Kremlin is looking to try and keep exports through this period to around 10mmt, compared to the 29mmt exported last year.
Next week
The market is watching the situation in the Black Sea very carefully. The limited upside in CBOT to date could be tested should supply routes be threatened.
Have any questions or comments?
Click on graph to expand
Click on graph to expand
Data sources: Reuters, SovEcon, USDA, Next Level Grain Marketing, Government Brazil, Bloomberg, Mecardo
Categories
Have any questions or comments?
Conflicting impacts on profitability
It feels like déjà vu writing about another conflict starting and the potential impacts on agricultural inputs and outputs. This time it’s Iran, not a
Short covering heralds a shift
I’ll admit to being a bit surprised to see the wheat market continue to rally over the past week. The return to work after the
Canola premium to swing some hectares
We recently had a query which came across the desk, (so to speak – in an email to be exact), which asked if canola would
Will these ripples build into a wave?
With a truncated trading week due to the US Presidents Day public holiday, combined with much of Asia closed for Lunar New Year celebrations, you
Want market insights delivered straight to your inbox?
Sign up to the mailing list to get regular updates to new analysis and market outlooks
Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published
Listen to the podcast
Join the Mecardo team for the Commodity Conversations podcast, where we provide short weekly market recaps and longer conversations with guests to discuss the drivers and trends in livestock, grain and fibre markets.
MEET THE TEAM
Our team of market analysts are recognised as leaders in Australian Ag market analysis, providing invaluable insights to help you navigate the ever-changing commodity landscape.
SERVICES AND CAPABILITIES STATEMENT BROCHURE
We don’t just bring you the most up to date market insights. Find out more about Mecardo’s services including risk management advisory, modelling, benchmarking, research & consultancy.