6 May 2020
- Supply remains relatively tight for both the first 15 days and 2nd 15 days of the period in our sample. This is likely to provide further support to prices in the next couple of day. Our concern is that the focus of the market participants will shift to the medium-term time-frame where planning conditions and preliminary yield estimates take hold. The cold signal forecast across the Corn belt for next week has so far failed to materialize in convincingly bullish “Climatic conditions” index.
- Our short-term demand assessment for up and mid-stream demand remains bearish, this is based on weak demand reading for April. We also notice a drop in our Buying Pressure Index on the physical grains market which can be partially explained by the lack of credit, as discussed on a number of occasions within these reports. Somehow encouragingly, our projections for demand in May look better possibly on the back of easing of lock-down restrictions in EU and continuous recovery of economic activity in Asia.
- The macroeconomic environment remains challenging and unlikely to provide material support to prices in the short-term. Evidence continues to suggest that credit will expand further and in many more locations, but the impact on demand will not be immediate. This is partially incorporated into our Forward Demand view discussed above. We tend not pay too much attention to the speculative money flows. Such flows are found to exaggerate price trends already in place, not create new ones. They are therefore trend-following in nature but the divergence between price and index is worth a thought.