Commodities

Despite temporary dips, continued uncertainty and volatility, the forecast for commodity prices remains positive – RealAgriculture

Although we’ve experienced dips in market pricing, experts are remaining cautiously optimistic stating commodity prices are likely to stay where they are for now, unless we some significant changes in the local and global landscape.

There are so many factors that are currently affecting the commodity markets. First and foremost is the ever-unfolding situation between Russia and Ukraine. Neil Townsend with FarmLink Marketing Solutions and Grain Fox, says the price dips that we saw on May 25th was in large part due to Russia saying they would consider and entertain a humanitarian corridor, which would allow shipments of grain and oilseed from Ukraine.

Albeit, if Russia and Ukraine were to come to some sort of peaceful agreement ending the war altogether or just simply one that would allow for better flow of goods, that would have a fairly immediate impact on the markets. However, Townsend shares that this morning’s announcement from Russia was the equivalent of getting dressed to run a marathon, we aren’t even at the starting line yet. We do not know what Russia’s stipulations would be on such a corridor, there have been mention of some sanctions being lifted among other requirements, but at this point in time, it is nothing more than a nod in the right direction and until formidable action is taken, namely by Russia, we aren’t likely to see anything permanent happen within the market.

Another highlight worth noting and mentioned by Townsend, is the endings of war usually come about when the cost of doing war becomes so large one — or both — 0parties, succumb to the demands or reach some sort of agreement. If the corridor agreement is reached and grain and oilseed is able to be moved out of Ukraine, it may in fact prolong the war in general as the impact is lessened by the implementation of the corridor agreement.

On top of the uncertainty that stems from the Russia and Ukraine war, we are seeing questionable circumstances in North America’s wheat crop, which isn’t help close the gap on the supply shortage. This is being felt in Manitoba and other locations where they are yet to get a crop in the ground due to weather blow after weather blow this spring. Additionally, Townsend says an area that isn’t being talked about a lot, that is also creating an impact on the wheat market is the French wheat.

“The French wheat is in some state of duress, and the forecast for the first two weeks is for minimal rain, and maintaining temperatures that are seasonal or warmer than seasonal, so that that could go further back and cause a ripple effect as well.”

We’ve also seen numbers adjusted in a downwards trend when predicting total exports to China which could end up being an under-promise-over-deliver type situation which could lead to greater demand on a global market that doesn’t hold a lot of export surplus. Townsend says this could be in the range of six to  10 million tonnes.

Supply issues also reigns true in the corn and soybean markets as well, as we still see shortages coming out of South America. In turn however, in the U.S., some are predicting that growers will see approximately 177 bushels per acre, some though, are saying those numbers could reach 180-181 bu/ac, which again, would have an impact on the markets.

An important point to keep in mind as we are seeing demand build up against the current export surplus, Townsend reminds us that we haven’t hit the crucial time where weather can either make or break crops. This being in June through August depending on which crop we are talking about, but what Mother Nature decides to do in those three months, again, could make or break crops, which would also have a direct impact on markets.

Given all of the aforementioned factors, Townsend shares a piece of advice for everyone watching the turbulence unfold on the world stage.

“Everybody should expect a significant continuation of uncertainty and volatility and nervousness, there’s no crystal ball to tell you how this is all going to unfold. What’s next? We don’t know. Except to say that we can add up how much import demand there is and how much exportable surplus there is and that’s where we see a gap. We see the potential for there being import demand that has to either look for other things, or just simply go without, and that typically benefits prices.”

Listen to the full conversation between RealAg Radio host Shaun Haney, and Neil Townsend, below.

 

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