11 March 2020
- Following the line of thought from our last week publication, we continue to assess the overall global supply of soybeans as “tighter”. If correct, this is likely to provide further support to the price. The behavior of many commodity markets in the last couple of weeks did not always follow the logic of the fundamental price discovery mechanism. Moments like this come to underline how important it is to have reliable assessment of the market fair value. Otherwise the daily market noise can easily overwhelm one’s ability to judge correctly.
- Our short-term demand assessment for demand remains bearish. This is reflected by the spot and forward soybean demand metrics in the model, both of which are aligned. The timing of the short-term demand swings are probably best described by our proprietary soybean Implied Spot Demand Index, which indicates persistent weakness during weeks #8-12 (AB), followed by short-lived strength (BC), and another period of weak demand (CD).
- Our short-term macroeconomic view keeps evolving, which is somehow understandable if we consider the unfolding global pandemic. This time our view turned modestly market-bearish. As it stands today, the most bearish factor in the model is the impact of the FX market. Admittedly, and as judged by the causal relationship between the index and soybean price, it is also one of the most powerful factors which influences the soybean price formation.