LOW STOCKS AND ONGOING PRODUCTION RISKS SET A FLOOR TO ANY PRICE DOWNSIDE.

Sébastien
15 Jul 2021

The price roller coaster continues. Ag commodities rebounded strongly on their recent lows, like a ball landing on concrete. Technical supports worked perfectly, once again: €200 on MATIF wheat, cts500 on CBOT corn, €500 on OSR MATIF…

Corn prices are up 10%, after a nearly 20% drop last week. Volatility is extreme. OSR prices have also been very well supported by the ongoing drought over the Canadian canola production area. The story is unchanged: it is all about low stocks, strong international demand and ongoing weather issues impacting production potential.

All ingredients are still on the table for another potential price rally. A lot will now depend on the weather conditions during the next 4 weeks in the US as well as Canada. That’s the place where most of the 2021/22 grain and oilseeds balance is at stake.

A crop failure there would inevitably take our markets to an unprecedented tight situation and take prices to rationing levels once again. The last and only hope would then be to fully rely on South American crops, with a drilling season starting as soon as September.

A decent US crop, still possible but more and more unlikely, would only allow world stocks to slightly rebound from their current low levels.

To make a long story short: volatility will remain very elevated, but any price downside should be very limited. A volatile market is a source of profitability for well-informed and advised farmers! So stay well informed and ready to act as higher price opportunities might appear sooner than later…

Sebastien MALLET
ODA UK