30 July 2020
- Spot supply on the global corn market continues to contract. The momentum of contraction has slowed since its peak during weeks #25-27, but it remains positive. Forward markets always try to price in forward looking information and in this case the lower momentum of contraction was considered by our model (and by the market itself) as a price-bearish development. We would rather say – not too fast!
- Overall demand remains weak in spite of some signals for tightness on the spot seaborne market. The price reacted accordingly. The main drag to demand, and subsequently corn prices, is the demand downstream which is, by definition, not captured by our “Spot Demand” metric (it influences the price formation at later stage of the process).
- We remain of the opinion that the macroeconomic environment is not constructive for further price gains. The evidence suggests that credit expansion has slowed as the demand for credit lines from economic entities weakened. Credit is vital for global physical commodity trading so quantifying its impact on the price formation of the corn market is an important part of what we do. Our attention is drawn to the fact that our data is now predicting a steep recovery in credit. This is not related to availability which was abundant in previous periods. It is most likely related to the readiness and the ability of the economic entities to borrow.