As has been the case for a few months, global agricultural prices have been very volatile again this week, torn between the supportive fundamentals and the negative macroeconomic outlook.
Attention has shifted to focus on weather.
Areas of the US corn belt are starting to become very dry for this time of the year and grain merchants are watching every update, trying to get a glimpse into the July forecast. While Brazil is likely to provide a buffer for any major US corn crop concerns, most analysis has been assuming record yields, which is always a tough starting point.
In Australia, the Bureau of Metrology continues to forecast a strengthening El Niño, which is supporting prices. Just because we have an El Niño event does not necessarily mean we shall have a bad crop. Timing of the rainfall this year will be very important.
Uncertainty continues around the future supply of Russian grains, with provocative headlines from both sides signalling disruptions. In the meantime, the Russian and Ukraine crops look to be in fantastic condition. While the crop is unlikely to be bigger than last year, most believe they will continue to be an exporter.
Prices locally continue to be steady/firm. Upside to price will come if there is an El Niño event, while the downside remains limited.