Agri Commodity Markets Monthly October 2020: Risks Fly South and Prices Head North
The USDA’s surprise discovery last month of light US G&O bins – combined with La Niña, exacerbated dryness in South America, and a ferocious Chinese restocking program – has ignited a risk rally in CBOT. Funds’ interest in ags continues to grow amid the backdrop, while record short commercial buyers appear to be caught unprepared. With dryness risks already apparent in typically lower-cost South America (corn, soy) and Black Sea (wheat) producers, consumers concerned about price inflation and availability are extending record purchases of US agri products and driving price risk higher. ICE #11 Sugar prices have been experiencing a similar price reaction, as the dry weather in Brazil raises concerns over next year’s crop despite record sugar production this year. ICE #2 Cotton prices have also rallied, on declining YOY stocks and elevated US sales to China.