CBOT agricultural futures closed mixed in the past week but are expecting recovery as the long-term outlook remains bullish, Chicago-based research company AgResource said, seeing the current 5-week correction in raw material prices as near end.
But extreme market volatility will persist, given the fear of a world recession, the Ukraine crisis and tightening supplies of U.S. and world energy and grain.
Corn futures settled higher amid ongoing strength in the spot market. On-farm corn stocks on June 1 were up 380 million bushels from last year, while off-farm stocks were down 140 million bushels, AgResource noted.
Producer selling will be limited as threatening weather in the central United States resumes.
Drought expansion across the U.S. Midwest and Europe is trimming yield potential, with a loss worth 12 to 16 million metric tons of the North Hemisphere production being probable if warmth and dryness in both regions extend into August.
Additionally, massive uncertainty over future Argentine exports due to soaring inflation and government policy will funnel most of the global feed demand to the U.S. market from September onward.
The long-term outlook is bullish as exporter stocks reach a new record low in the 2022-2023 crop year.
Global wheat futures scored seasonal lows this week, as import demand returned and exportable supply dwindled amid cuts made to European production. The market was oversold and fundamentally undervalued.
The supply pressure will be easing, as the U.S. winter harvest nears 70 to 75 percent complete in mid-July, with a post-harvest rally projected into winter months.
Russian exports will be challenging as hedging future tax or price risk is nearly impossible. Ukrainian exports will be capped at 8 to 10 million metric tons in 2022-2023, as against 19 million in 2021-2022.
Export potential in Europe and Argentina is in fast retreat amid adverse weather.
Soybean futures were under intense liquidation pressure to start the holiday-shortened trading week, as crude fell as much as 10 U.S. dollars per barrel in early week trading. But after falling more than 2 dollars per bushel in the last three weeks, a recovery was underway by midweek.
Market volatility will remain extreme. Initial targets for November soybean are at 14.75 to 15.00 dollars, while a late-season weather problem will send CBOT and cash prices to new record highs.
Source: Xinhua
