12 May 2020
- Supply of corn along the entire supply chain remains high despite the modest contraction recorded during weeks #18-19. Weakness in seaborne demand for the best part of Q1 is one of the reasons for the sharp accumulation of corn in the system. The negative supply shock is clearly visible during week #1-4. We are not registering any help from the inventory cycle either. The cash & carry arbitrage values for the physical corn market simply do not justify speculative accumulation of stocks.
- We assess the demand for corn as firmer in the short-run and prices should take notice. Our proprietary metric for weekly downstream global corn demand forms our forward demand view, and it is displayed on the chart below. Weakness in demand during Q1 mentioned earlier is clearly visible for weeks #4-18 as it formed a powerful downtrend. The prospects for demand during weeks #20-21 are more encouraging but we should not forget the low base of the index.
- The macroeconomic environment remains challenging and unlikely to provide material support for prices in the short-term. Evidence continues to suggest that credit will expand further and in many more locations, but the impact on demand is not visible yet. Another point of concern for us is the negative reading of the FX Impact Index. Our FX model incorporates not only the incentive to export at origin but also the purchasing power of the end-user.