Thursday, September 21, 2023

March 2021: seeds of doubt

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Rabobank, Agri Commodity Markets, March 2021

The long price surge in Agri commodities markets subsided last month, as la Niña weather worries eased and South American crop advances pushed frenzied speculators to catch their breath.

Photo: Rodrigo Flores on Unsplash

Wary consumers start to think of the most consequential US summer harvest in the last eight years. Then, as now, high US acreage and inputs will be no panacea; corn and soy must also yield well to keep corn and soy stocks from falling into scarcity. The high bar for supply reflation is even more daunting if one considers the low US corn and soy yields of past two years and the tail risks from late planting in South America. We expect prices to remain elevated for G&O, with large moves to the upside following minor weather impact.


Wheat prices likely to remain elevated on increased feed demand. Elevated corn and soybean prices will lift wheat as a feed grain, especially with the low wheat-corn ratio. Export demand may put pressure on Europe ahead of harvest; low stocks will mean high volatility.


The market traded down, in line with our forecast. The second contract (July21) is trading at USc 15.5/lb, in line with our previous Q1 forecast. The focus of the market will be the start of the harvest in Brazil, which, as usual, can bring surprises.


Rising demand and yield risks raise our price forecast for CBOT Corn out along the curve. Chinese demand –4mmt of US corn bought last week –will push ending stocks below 1.3bn bushels. Safrinha planting is largely taking place outside the optimal window and there are forecasts of a dry US.


Coffee price forecast largely maintained. Brazilian rain is seen as sufficient to maintain cherries over March. Brazilian real volatility has been extreme, resulting in the BCB raising interest rates by 0.75%.


CBOT Soy acreage competition and weather woes keep supplies low into 2022. South American production appears to have stabilized but won’t be a remedy for low US stocks. Low bean availability and export competition for US by-products hit crush margins.

Soymeal & Oil

CBOT Soy Oil’s outperformance vs. Meal has reached multi-year highs. High US soy prices and South American crop stabilization limit strain on US export demand. US domestic use of meal and oil has been resilient to Covid, and lockdown easing will grow demand more.

Palm Oil

Palm oil prices will continue to be influenced by volatility in the global soft oils complex. Tightness in global soft oils supplies will provide support to palm oil prices in 1H 2021. Indonesian and Malaysian palm oil production and inventories to improve quarter on quarter inQ2 2021.


ICE #2 Cotton comes under pressure, falling in-line with Rabobank’s forecast. Rabobank forecasts strength to persist through Q2 2021, with old crop contracts supported by a persistently high net unfixed call sales position. Phenomenal strength in 2020/21 US exports has led us to revise our export forecast to 15.8m bales.


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