In the US, corn prices are now below the cost of production. The so-called ‘fight for acres’ as commodity prices are manipulated to try to incentivise growers to plant, may become a full-blown capitulation. Similarly, despite the stockpiles of US beans, cheap new season Brazilian beans are being imported into the US as the US$50/t difference in price is more than enough to compensate for freight and storage.
So where will the next lot of bullish news come from? In the next few weeks, we should start seeing acreage reports. Don’t be surprised to see some relatively significant shifts, especially in the more marginal US counties away from corn and beans.
Low prices also tend to incentivise importers, especially if they feel that prices are plateauing. While demand has been considered lacklustre, the truth is it has always been there, but the consumer is buying hand to mouth. It is the elastic demand, the additional purchases made outside of ‘normal’, that spurs the market, and it is this that has been lacking. If the market continues to show signs of bottoming, maybe this will change.
The Chinese New Year (two-week holiday) is over and it was hoped that we would see an uptick in consumer demand. But two things have happened in the last couple of weeks. Firstly, the Chinese Agriculture Ministry has said storm damage done to their corn crop was far less than initially reported. This immediately dampens their demand for feed. Secondly, the Chinese pork industry has been under pressure as economic conditions start to bite. This has lowered the price of pork, squeezing feed margins. The Chinese Government is trying to prop up the economy by providing stimulus where required and dropping mortgage rates. If we see the economy show signs of improving, it is hoped this will flow through to commodity demand.
Politics will still have a place in commodity pricing. The war in Ukraine, while still raging, is not affecting supply channels as it did in the immediate aftermath. The issues in the Red Sea have become yesterday’s news.
If you are a commodity trader, or a farmer sitting on unsold grain, 2024 is proving to be a tough year – and it has only just started. Forever the optimist, however, I’d like to think there will be some pricing opportunities before too long.
Hurry up and wait
Next week
It remains a case of hurry up and wait. The spring (Northern Hemisphere) weather market will likely throw up the odd curve ball. Until then the market will follow the path of least re-sistance.Have any questions or comments?
Click on graph to expand
Click on graph to expand
Data sources: USDA, Barchart, Reuters, Next Level Grain Marketing
Categories
Have any questions or comments?
Harvest twenty percent done
Harvest has kicked off in earnest in NSW and is winding down in Queensland. Victoria and SA have made a start, and we are still
Oilseed markets find support as US–China trade talks progress
This week’s meeting between Presidents Trump and Xi largely lived up to expectations, we think. High on the agenda, and one of the most closely
Looking for a pulse
Despite the rise of canola as a break crop, pulses remain a very important part of the crop rotation for broadacre croppers. In fact, the
Trade tensions, sanctions and silence from the USDA
Without the usual run of USDA trade data to generate headlines, the wheat market has been rela-tively subdued this week. In the absence of meaningful
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.