23 July 2020
- The looser supply conditions along the global bean supply chain we discussed in previous notes continue to impose a ceiling above any attempt for a market rally. Weather conditions in the USA remain key swing factor for prices in July. Our proprietary climate model turned decisively bearish 3 weeks ago suggesting that stress is piling up for July, and now early August.
- Demand for soybean up, mid and downstream is weak which should be major concern for the bull’s camp. Last week we wrote that “…we are also concerned that the negative pressure is not abating as we enter the 2H July”. And indeed, the support offered by the downstream demand in key consumption regions is starting to dissipate.
- The macroeconomic environment has somehow improved, thanks to better Asian and European macro data. Our concern last week was the price-negative signal we extracted from the FX markets. We wrote that “…the downward pressure is unlikely to abate this or next week, which imposes a ceiling on any attempt for the price to rally.” We were wrong, as the USD continued to lose ground which resulted in a sharply better reading of our Currency Impact Model.