16 November 2020
- The focus is now back on the crop-related weather developments in South America. The result from our Climate Index so far challenges the strong upward price trend of the corn market suggesting that the yield is unlikely to surprise on the downside. Therefore, it is still the case that this rally is propped up by demand-related factors, not supply.
- Our Implied Weekly Corn Demand metric continues to suggest that the positive demand shock is still very much alive. The market responded in line with the demand pressure and the share of demand in the overall corn price formation process reached 44% - by far the strongest contributor amongst the supply, demand and macroeconomic forces included in our econometric model. We remain cautious for the demand downstream, which remains our main concern for the 4th week running.
- The investment community appears largely in agreement that the uptrend has room to run, as “hot” money has continued to pile up on the trend. Our proprietary quantitative research platform for agricultural markets suggests that the importance of macro factors in the corn price formation has increased sharply from 23-24% last week to 31% this week.