8 October 2020
- Even if our data for the supply of corn on the spot continues to indicate moderately elevated supply, the view of our proprietary model further down the line remains markedly different. This view is now also supported by the climatic conditions in Brazil where increasing attention is paid for the new crop. Our CCI for Brazil continues to indicate crop yield-limiting properties. This is hardly the only reason behind the recent price rally, but it is an increasingly important contributor, nevertheless.
- Our proprietary metric for weekly corn Implied Forward Demand continues to suggest strong demand during October (our visibility window for forward demand is +4 weeks) and so far, the market has responded in fashion. We remain concerned for the strength of demand downstream. This is a sign that buying is concentrated predominantly by mid-stream players, such as trading houses. As we all know, their interest can evaporate on the first signs of difficulties in the off-take from end-users, so caution should be applied.
- 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 increased again this week to 35% of the overall price formation. This is happening at the expense of supply-related factors. Currency markets still refuse to support the on-going strengthening of the grains sector, which is an important difference compared with previous periods of price appreciation, and another sign of potential troubles for the price ahead.