Corn prices in the CBOT approach USD 5.00/bushel with no demand surprises

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    Porto Alegre, January 1st, 2021 – We must understand that this flow of capital to the commodities market has strengthened the bullish momentum, more sharply than could occur in a condition closer to normal. Of course, some indicators really support the upward movement in the international market, but its intensity has given a strong contribution to the very high international liquidity. The other point is that the appreciation of China’s currency increases its purchasing power in the international market, which leverages expectations that China may have a new strong movement of purchases of corn and soybeans in the coming few weeks.

    2021 brought some important variables to the international corn market. Some points are relevant now:

    – The strong appreciation of the Chinese currency accelerates the country’s import capacity;

    – Corn prices in China continue to rise despite the return of sales of official stocks. The price in China is now above USD 400/ton;

    – The devaluation of the US currency allows local exports to become more competitive, creating a favorable environment for price highs;

    – The price rise in China and its differential against corn prices in the United States accentuate the optimism that imports will grow or occur at any time;

    – Brazil is out of new exports until July due to the lack of domestic supply;

    – Argentina has just stopped a general strike in the transport and port sectors, besides another of tax auditors, a factor that added a speculative component to the prices of corn and the soybean complex on the CBOT;

    – The government surprised the international market with the suspension of registrations of new corn exports until the beginning of the new crop, that is, next March. The act generated an environment of widespread protests, which must end up with a week of stoppage of Argentine agribusiness this week. The government threatened to halt all exports until March to meet domestic supply and hold back the rise in prices;

    – The Argentine attitude put the international market on alert. It is a major exporter, with late measures and incompatible with the free market, in a rupture with agribusiness. At the same time, the Argentine government allows an unreal mismatch between the official dollar, near 80 pesos, and the parallel dollar, close to 170 pesos. In the midst of this, growers are forced to sell and lock the currency in an unrealistic way;

    – These are decisions that concern the international commodities market to be a fundamental exporter for corn, wheat, and soymeal and with great influence on the formation of prices on the CBOT;

    – Finally, the data on pig herd in China. USDA is expected to update its projections on this item on the 12th, and we must verify the consolidation or not of the information sent to the market by China on a herd with strong recovery. If confirmed, the environment for the meat market may be radically modified from this year, and the Chinese demand for feed grains will gain a stronger than expected growth environment.

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