Market Dynamics Unveiled: Global and Domestic Factors Impacting Futures Markets Across Agriculture and Commodities”
The domestic fundamentals of the US futures markets appear impervious as we approach March delivery, showing little responsiveness to deliverable stocks. Despite historically low stocks and increased loadouts from Duluth, Minnesota, the market lacks significant support. On a global scale, the EU/Black Sea weight has driven Russian FOB values back to levels close to those observed in June 2023.
Domestic
Amidst the complexities, it is essential to recognize China as the key influencer of global Agricultural values. Surprisingly, its domestic futures markets offer little inspiration, with Dalian Commodity Exchange (DCE) corn and hogs hovering near long-term lows. This is noteworthy, especially considering the significant role the pork sector plays in China’s domestic feed demand. Despite this, China’s equities have experienced a modest rally, potentially attributed to government initiatives. Intriguingly, both Goldman Sachs and Citi express extreme bullishness regarding iron ore following China’s central bank’s announcement to reduce the reserves banks must maintain, injecting over US$140 billion back into the economy.
On another front, Indonesia is gearing up for its presidential election on Feb 14, marking the end of President Joko Widodo’s decade-long tenure.
As the USDA crop report looms, US corn futures hit a three-year low, driven by South American production and reduced Chinese activity during the Chinese New Year. The Brazilian national agricultural agency, CONAB, is expected to release its estimates on South American production, further influencing market dynamics.
In the Australian context, local markets have experienced relative calm, with spot demand primarily tied to export demand. ASX Jan-25 futures tested recent lows, settling at A$375/t, while current crop delivered Melb ASW1 witnessed a $1-2/t decline, closing at $366/t for March delivery. In the northern regions, the recent slide in sorghum values has found some support, albeit subdued, with sporadic header activity. Discussions around export parity have been substantiated by spot box demand, although bulk demand appears to be on the sidelines. The true evaluation of value awaits the post-Chinese New Year and post-USDA WASDE report periods, serving as the optimal barometer for sorghum export parity once traders incorporate physical numbers into the global corn balance sheet.
