Rabobank Australia, Media Release, 30 September 2022
Commodity markets are pondering the risk of a recession, especially in the EU-27+UK, where inflation and monetary tightening are combining with a looming winter energy crisis.
A recession could weaken the demand side for a number of energy and luxury commodities. Brent is down 15% MOM (leading to drops across the vegetable oil sector), and the US dollar index is up 4.1%. A cancellation of the Black Sea grain deal is likely, but it is mainly priced in already.
The US’s heat-shriveled soy and corn harvests will push 2023 stockpiles to dangerously low levels and have encouraged funds to return to their long positions.
However, early rainy weather in Brazil’s key agricultural areas has been excellent, bringing promise for needed export relief from outside the US.