15 December 2020
- There is a noticeable difference between our supply-side view expressed in November and today. The reason for this is the negative divergence between the rising supply and the market price. The assumption is that everything else is unchanged, which is hardly ever the case, and that rising supply will put pressure on price. For those readers who missed previous discussions on the topic, “Forward Supply” in this example is the amount of soybean 1 month ahead calculated from the tonnes currently within the supply chain, plus adjustments for future release (exports or inventory drawdown).
- Our demand view has also changed for the worse. A previous assumption for demand weakness towards the end of Q4 is now re-emerging. The steady improvement of purchasing power of key buyers is now clashing with withdrawal of credit.
- We have recently introduced probabilistic modelling to our existing deterministic approach. One of the outcomes from this new analytical tool is that, after running the so-called bootstrapping technique on number of market drivers, we can calculate the probability of the market to generate bullish or bearish conditions on the back of the simulated changes.