24 March 2020
- There are early tentative signs of tighter supply for this week and next week. This is picked up by our proprietary Implied Spot Supply Index. Admittedly, the data which is normally fed into the Spot supply model was late in identifying the shift, and the market reacted earlier than the actual data did. The climatic conditions in Brazil remain favorable for stable exports, but this is increasingly irrelevant as our focus is now turning to the situation in the USA.
- Our short-term demand assessment for up and mid-stream demand remains bearish. This is reflected by the spot and forward soybean demand metrics in the model, both of which are aligned. Demand downstream (end-user demand) is demonstrating remarkable come back.
- Our short-term macroeconomic view keeps evolving. This time again in the direction of market-bullish conditions. The most bullish factor in the model for the last 2 months was the spike in short-term credit. Unfortunately, the global events suppressed the expected positive market reaction. The evidence suggests that credit will expand further and in many more locations, but the impact on demand will not be immediate. The divergence between price and credit creation is unlikely to be ignored by the market for too long.