13 May 2020
- The support offered to price by some concentrated buying on the physical market in the last month or so is gradually dissipating. This is well described by the proprietary Implied Spot Supply model. It is worth remembering that this model focuses only on the supply conditions for the next 15 days. Looking beyond this very specific (and carefully chosen) time-line, we resort to the traditional crop yield estimates which are, amongst other things, a function of the plant development conditions and rate of planting of the new crop.
- Our short-term demand assessment for up, mid, and down-stream demand remains bearish. The spike of spot demand during weeks #19-22 we anticipated in previous publications is now underway. The soybean price did react on the upward pressure in demand, but what we expect next is not very encouraging for our estimate of spot demand during weeks #22-30.
- Our short-term macroeconomic view remains cautiously bullish. This view is supported by the steady increase of purchasing power of key consuming regions. Another development is the divergence between the momentum of speculative positioning and soybean price. We tend not to pay too much attention in this particular development. Speculative positioning is a trend-following indicator (coincidental to price action at best) which is not part of our working framework. We are most worried by the fact that credit is not coming through the system in any meaningful numbers. In fact, our proprietary Credit Flow Index suggests that contraction is under way.