17 June 2020
- We estimate that the supply of corn along the supply chain will continue to contract. Therefore, a stronger price can be expected across the board. Underwhelming seaborne demand between January and May resulted in heavy supply accumulation, as measured at all points of the delivery chain. The lowest point was in May with June, and specially July, registering an improvement.
- The weakness in demand YtD is clearly visible. Regardless, our proprietary metric for weekly global forward corn demand continues to indicates that a positive short-term demand shock will continue to accumulate. The price of corn is following closely. Strong price reaction is not warranted, as overall S&D balance along the value chain depends on both supply-push and demand-pull forces.
- The macroeconomic environment keeps improving. Evidence suggests that credit is starting to expand in key consumption regions. We continue to expect credit to grow as economies re-open and the demand for credit lines from economic entities grows. Therefore, it comes as a surprise to see that after decomposing the corn price drivers, the influence of macroeconomic forces in the overall price formation has in fact contracted – see Chart of the Week. Supply-related drivers stand to benefit the most from the retreat of macro as a theme in the corn market investment process.