AGS WEEK AHEAD: Bearish Mood as U.S. Dollar Makes Gains, China Stimulus Hopes Fade

By Joe Hoppe

A roundup of key agricultural commodity markets for the week of Oct.14-18 by Dow Jones Newswires in Barcelona.

GRAINS & OILSEEDS: The macro mood is bearish as the latest U.S. economic data boosted the dollar against important commodity currencies and optimism for Chinese economic stimulus has faded.

U.S. Consumer Price Index data on Thursday surprised to the upside, lowering the chances of another jumbo interest-rate cut and pushing up the U.S. dollar against key currencies like the Brazilian real and the Chinese yuan--a bearish headwind for commodity markets, Peak Trading Research analysts said in a note.

Meanwhile on the weather front, forecasts point to warm and dry weather in the U.S. with rains headed for the western Corn Belt this week. The latest USDA report brought no surprises, confirming great U.S. harvest yields and pressuring grain prices lower on Friday.

In South America, widespread rains are forecast for Brazil over the week. This will help restore some ground moisture and accelerate planting, bearish for traders, Peak Trading said.

Geopolitical and fundamental risks are still under-priced across wheat and corn markets, JPMorgan analysts said in a note. While Middle Eastern tensions have already added a risk premium to energy markets, agricultural traders should take heed amid critically low grain inventories outside the U.S. and an intensification of food weaponization in Russia's invasion of Ukraine, JPM said.

Chicago wheat futures are down 1.7% at $5.89 a bushel on Monday, while corn is down 1.3% at $4.11 a bushel. Soybean prices are down 0.3% at $10.03 a bushel.

SOFT COMMODITIES: Coffee and cocoa have risen sharply over the past week, bouncing back from losses incurred after the European Union delayed deforestation legislation.

Prices for other softs--including sugar and cotton--slipped slightly over the week, but still remain historically elevated on adverse conditions in key markets, like the U.S. for cotton and Brazil for coffee and sugar, according to market watchers.

Cocoa prices are up 66% year to date but are down 1.8% on the month, while coffee is up nearly 30% year to date and 3.5% on the month. Sugar is up nearly 9% year to date and roughly 19% on the month, and should remain elevated throughout the rest of the year on lower expectations for Brazil's output and export restrictions from India, said analysts from BMI, a unit of Fitch Solutions.

Cocoa demand statistics for the European Union will be released Thursday by the European Cocoa Association. The report includes the volumes of grindings, or beans processed to be turned into chocolate, which are used as a proxy for cocoa demand as Europe is one of the world's largest markets for cocoa. If demand remains strong while cocoa supply remains constrained, prices could significantly rise.

On Monday, cocoa is down 2.1% at $7,579 a metric ton, while coffee is up 2.9% at $2.59 a pound. Sugar is up 0.45% at $0.22 a pound.

Write to Joe Hoppe at joseph.hoppe@wsj.com

(END) Dow Jones Newswires

October 14, 2024 11:59 ET (15:59 GMT)

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