“However, the decline is likely to be short-lived and the BDI has already showed some signs of recovery, back to its over one-year high reached at the start of November,” finds an economic outlook from CRM Agri.
In other logistics related developments, there are growing concerns around supply bottlenecks in Brazil due to some weather-related disruptions weighing on port capacity and increasing waiting times for ships.
El Niño risks
Global agricultural markets were mainly driven by unfavourable weather conditions in South America and El Niño risks over the past month.
“Very hot and dry weather in Brazil’s key soybean growing regions over the past couple of months has slowed the pace of planting, helping support US soybean markets. Moreover, some deteriorating wheat prospects out of Argentina have propped up global wheat prices. Corn prices traded lower on the back of better production prospects out of the US as well as a decline in crude oil prices.
“In terms of macro drivers over the past month, the retreat in energy prices played its role in keeping grain prices down. Crude oil prices fell sharply as the perceived risk surrounding the Hamas-Israel conflict on global oil supply eased. In addition, oil traders looked ahead to crude oil demand prospects in 2024, which have been taking a slight knock due to weaker global growth prospects,” commented the UK-based analysts.
They noted that Chinese demand looks quite strong as seen through the rapid pace in soybean imports from the US after a relatively slow start to the 2023/24 crop year.
"This demand is likely to remain high in the coming months, although there are fears that the recent drop in pork prices could lead Chinese producers to cut their pig herds, which would weigh on global feed demand," said the grain and oilseed market specialists.
Overall, the US Federal Reserve’s influence over global markets is falling to more normal levels and the macro environment is having a much less pronounced impact on global grain prices, they remarked.
"Energy prices will still have a strong influence on grains and are forecast to trade higher than current futures markets would imply, boding well for grain markets in 2024.”