17 September 2020
- We remain of the opinion that purely from the spot supply perspective, the on-going rally makes little sense. The supply chain of the global corn market is well balanced at any point we observe. The mild tightness which formed during weeks 31-35 is starting to dissipate. This is evident from the divergence between our Inventory cycle Index and the price, displayed in the Chart of the Week.
- Our proprietary metric for weekly global forward corn demand continued to suggest the emergence of a second wave of a positive short-term demand shock during weeks #36-38, and the market responded in fashion. We are increasingly worried about the weakness in downstream demand which has been forming since week #37.
- The momentum at which credit is created remains strong and is having a direct impact on the corn price formation. The importance of macro factors steadied at around 30%, while the influence of demand-related factors on the price increased sharply this week. Currency markets refused to support the on-going strengthening of the grains sector, which is an important difference compared with previous periods of price appreciation.