By Yusuf Khan


The macro environment remains key for agricultural commodities, with rallies in crude, the Brazilian real and Chinese yuan last week all helping push agricultural futures higher.

"The macro mood feels much better after last week's softer CPI inflation data," Dave Whitcomb, head of research at Peak Trading Research said in a note. "Investors are betting that the Fed transitions to more dovish policies by mid-2023. The U.S. dollar is at 7-month lows and Fed 'pivot' trades like gold, copper, and Bitcoin are outperforming," adding that the boost to this assets is also helping crop prices to recover.

Much of this will depend on this week's macro data, with a raft of Chinese economic data released earlier on Tuesday and U.S. PPI due Wednesday.

That said, Chinese demand remains uncertain and according to Fitch Solutions remains a market risk in 2023. The country became the largest agricultural importer in 2019, Fitch Solutions said, meaning that how it reacts to postlockdown measures will be a major factor when it comes to pricing.

"As 2023 starts, uncertainties related to China's exit from its 'zero-Covid' policy and the authorities' ambition to enhance domestic food security have coalesced and augur heightened market risks for the year ahead," Fitch Solutions said in a note.

Additionally, flows of cheap grain from Ukraine continue to suppress prices in the U.S. with demand being undercut, Mr. Whitcomb added.

Chicago-wheat futures are down 1.7% to $7.31 a bushel, on Tuesday while corn is 0.8% lower to $6.70 a bushel.


SOFT COMMODITIES

Demand concerns have been weighing on coffee prices, with Rabobank noting prices were down 9.3% last week.

In terms of sugar however, Marex's Robin Shaw said in a note that the "consensus has moved on to a grudging admission that the tightness is real, and has lasted since June, and will not turn into a surplus overnight."

Mr. Shaw said that lower yields in India, transport delays, higher consumption would help to mean that the surplus in the sugar market might not be realized till the end of 2023.

Coffee futures in New York were down 1.8% to $1.49 a pound, raw sugar was 0.4% higher at $0.20 a pound while cocoa was 0.1 lower to $2,649 a metric ton.


Write to Yusuf Khan at yusuf.khan@wsj.com


(END) Dow Jones Newswires

01-17-23 0921ET