Finally, the fundamentals of supply and demand are starting to drive global agricultural prices. As has been discussed in this column for several months, global agricultural futures markets have been driven lower by the negative macroeconomic outlook.
This past week concerns over the drought developing in the US Midwest forced funds to cover a decent amount of their short position. The weather forecast can change at any moment, but at the time of writing the US corn belt remains hot and dry.
Demand remains very sluggish, as consumers drawdown stocks to pipeline levels and lack the confidence to buy further forward. Despite this, grain merchants will be solely focused on supply side factors for the next two months and worry about demand later.
Australian grain prices have not followed overseas market higher one for one.
Rainfall in June has surprised everyone to the upside, and the El Nino has not really had an effect climatically, so far.
Canola prices have been the standout performer, mostly driven by funds covering their oversized short positions in the Matif and Winnipeg exchanges.
Local canola prices have firmed 30-40 dollars a ton over the week and are likely to continue to stay firm.