AGS Week Ahead : Bullish Mood as Dollar Falls on Positive Inflation Progress

By Joe Hoppe

A roundup of key agricultural commodity markets for the week May 20-May 24 by Dow Jones Newswires in Barcelona.

GRAINS & OILSEEDS:

The macroeconomic mood is bullish after last week's positive inflation data weighed on the U.S. dollar.

The dollar fell on Consumer Price Index data in line with expectations, raising hopes for a Federal Reserve interest-rate cut in the near term. The release of Fed meeting minutes from May 1, which may provide further clarity around the path towards monetary easing, is set for Wednesday.

Importantly, crude oil prices have also stabilized, Peak Trading analysts said in a note. This further strengthened the outlook, as crude oil prices have a strong correlation with agricultural markets, as it is used throughout the agricultural process from fuel to fertilizer.

U.S. weather was dry for planting across Illinois and Iowa over the weekend, but extended forecasts remain wet for large parts of the corn belt, which will continue to delay planting. Farmers need a window to get back into the fields this week, as important planting cutoff dates in late May and early June approach.

Weather concerns in Brazil, where heavy flooding has hit the largest wheat-producing state, and in Russia, where major grain-producing areas declared a state of emergency due to frosts damaging crops, are also driving prices, BMI analysts said in a note.

Black Sea weather was dry again last week. Extended forecasts show some promise, but traders want to see rains materialize before liquidating their large long bets built in late April and early May, Peak Trading said.

Friday's commitment of traders report indicated hedge funds bought a lot of corn, along with soybean meal, driven by the delayed U.S. planting and the weak dollar, among other factors. Hedge funds also sold sugar.

Meanwhile, prices for Kansas wheat futures tend to drop in late May and June as the U.S. harvest ramps up while vegetable oil markets are also turning more bearish.

Chicago wheat futures are 4.9% up at $6.83 a bushel on Monday, while corn is up 2% at $4.61 a bushel. Soybeans prices are 1.3% higher at $12.44 a bushel.

SOFT COMMODITIES:

Cocoa prices have plummeted since hitting an all-time high of $11,722 a metric ton on April 19, sparked by a steep rise in margins. Following the swift exit of traders, the lack of liquidity in the cocoa market has left it susceptible to bouts of short-run volatility, BMI said.

Cocoa is down 38% on month, with forecasted rainfall in West Africa likely contributing to the decline, Rabobank analysts said in a note. It is still around 68.5% higher since the start of the year on supply-side challenges in West Africa, where 70% of global cocoa is produced.

BMI expects global cocoa production to fall by nearly 12% in the season ending in 2024 to 4.4 million tons, and hiked its average price forecast for ICE-listed second-month futures to $6,500 a ton from $6,000, analysts said in a note.

Elsewhere, in the sugar market, robust supplies and strong export prospects from Brazil are keeping a lid on prices.

Cotton also reported losses last week as the U.S. planting season continues, with the latest crop progress report indicating sowing is outpacing the five-year average.

Cocoa is down 0.7% at $7,297 a ton, while sugar is 3.1% higher at 18.7 U.S. cents a pound on Monday. Coffee is down 0.3% at $2.06 a pound, while cotton is flat at 76 cents a pound.

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(END) Dow Jones Newswires

05-20-24 1201ET