Agri Commodity Markets Research April 2022: Many Fish To Fry

It is hard to see any significant downside to agricultural commodity markets. The US drought has worsened, resulting in the worst wheat crop conditions in 16 years. Even though there is lingering dryness in large parts of the wheat belt, recent rains in the corn belt have delayed corn planting. La Niña will likely linger for longer, making ‘normal’ weather unlikely. On the financial side, index funds have been buying agricultural commodity futures every week for the last seven weeks on the back of prolonged inflation concerns. Food price inflation is becoming particularly concerning. As a perfect example of this, Indonesia is banning exports of palm oil to contain domestic prices. Even though this is expected to be temporary, the piecemeal announcement resulted in huge volatility across vegetable oil markets. Indonesia, however, concerned with domestic food prices, has a bigger fish to fry.

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