Commodities Shuttle: Agricultural products fall in the foreign market, but high level should continue

The commodities sector starts the week with strong drops in the international market. The reasons are many and led investors to increase sales in search of profit making.

On the financial side, investments in the US Treasury began to pay more, which takes speculative money out of commodities and takes it to a safer haven.

Agricultural funds’ long positions are still high, but are already lower than in previous weeks. Actively managed investment funds in soybean futures and options had a net long position of 24 million tonnes of soybeans as of April 19. Now they have 20.8 million.

The position of investment funds in corn was reduced to 44 million tons, a volume lower than the 47 million in the first half of April.

Investors may just be taking advantage of this momentum in the market to take profits, but there is a widespread tendency for world banks to raise interest rates, which could drive funds further away from commodities.

There is also concern about China, due to the effects of Covid-19 on the country’s industrial activities. Lower demand for metallic commodities and difficulties in agricultural product transactions are expected.

Chinese soybean imports, up last month, are starting to recover. From January to April, however, China bought 28.4 million tons of soybeans, 1% less than in the same period last year.

This reduction may also be due to the high international prices of the oilseed, which has brought heavy costs to the country’s animal feed industry.

The fall in agricultural commodities is also related to improved weather conditions in the US, which favors planting. Although it is still late, sowing is in better condition than in previous weeks. The most benefited is corn, which had a tighter planting period.

According to information from this Monday (9) from the Usda (United States Department of Agriculture), corn planting reaches 22% of the area that will be destined for the cereal. Soybean is 12%.
Both are below the percentages of the average of the last five years, which is 50% and 24%, respectively.

In the assessment of World Bank technicians, however, commodities will still face a period of several months of pressure. According to the bank’s late-April report, relief will only come next year.

The turmoil left by droughts in several grain-producing regions and the increase in inventories in the world’s largest consumers during the pandemic period raised agricultural commodity prices.

This pressure was even greater with the price increases of the main inputs in the sector, such as energy, fertilizers and maritime transport.

The war between Russia and Ukraine has put even more difficulties in international food transactions, such as corn and wheat. It also put pressure on costs, given the region’s importance in the supply of fertilizers.

All this has led to record prices, and the return should be slow and cause intense effects on countries’ inflation, according to the World Bank.

This Monday (9), agricultural prices, following oil, retreated both on the Chicago and New York Commodity Exchange. In this, coffee registered the biggest drop, to US$ 2.05 per pound (453.59 grams), a decrease of 3.3%. On the same Exchange, sugar had a retraction of 2.8%, and cotton, of 0.6%.

In Chicago, the first wheat contract fell to $10.93 a bushel (27.2 kg), down 1.4%. One of the products most affected by the war in Eastern Europe, due to the importance of Russia and Ukraine in the world supply of this cereal, wheat costs 43% more than a year ago on the foreign market.

Soybeans traded at US$15.85 a bushel (27.2 kg), down 2.53%. Corn retreated to US$ 7.72 per bushel (25.4 kg), 1.6% less than on Friday (27) at the Chicago Stock Exchange.

In Paraná, soybeans closed at R$ 181.45 per bag, down 1%; and corn, at R$ 86.15 in the region of Campinas, with a decrease of 0.6%, according to Cepea.