AGS WEEK AHEAD: Bearish Mood as U.S. Election Uncertainty Weighs on Agricultural Complex

By Joe Hoppe

A roundup of key agricultural commodity markets for the week Nov. 4-Nov. 8 by Dow Jones Newswires in Barcelona.

GRAINS & OILSEEDS: The macro mood is bearish ahead of an important week for risk assets and commodity markets, with nervous stock markets and weak commodity currencies.

The U.S. election on Tuesday, a Federal Reserve policy decision on Thursday and a World Agricultural Supply and Demand Estimates report on Friday are keeping market uncertainty high, Peak Trading Research analysts said in a note. Stock markets are slumping, interest rates are rising and key commodity currencies like the Brazilian real and Australian and Canadian dollars are weak against the U.S. dollar.

Republican nominee and former president Donald Trump is viewed as the strong dollar, pro-market but pro-tariff candidate, while Democrat nominee Vice President Kamala Harris is viewed as the status-quo, regulation-heavy candidate. Agricultural traders and exporters will remember the bearish impact the 2018-19 trade wars under Trump had on U.S. grain prices, Peak Trading said.

A return to tariffs and a hostile trade relationship between agricultural juggernauts China and the U.S. under Trump is the biggest implication from the elections for agricultural markets, JPMorgan said. Lower energy-based input costs for farmers are likely under both administrations, while agricultural labor supplies are also likely to be squeezed by Republican immigration policies, JPM adds.

Meanwhile, Brazil's weather has been good for farming, with widespread rains and mild temperatures. Markets are pricing out a weather-risk premium and soybean planting is accelerating.

Seasonal prices tend to be bearish in November, particularly for the grain and sugar markets, before turning bullish in December due to the festive period.

Chicago wheat futures are up 0.4% at $5.71 a bushel on Tuesday, while corn is up 0.2% on $4.17 a bushel. Soybean prices are up 0.3% at $10 a bushel.

SOFT COMMODITIES: Agricultural softs have given a mixed performance over past week, with cocoa and coffee recording small gains, and sugar and cotton small losses--though prices still remain elevated on adverse conditions in key markets, according to market watchers.

Cocoa has gained on week as fears of a smaller surplus pushed prices upward, despite stable weather and robust arrivals data in powerhouse producer Ivory Coast.

Despite the slight easing in sugar prices over the past week, the fundamentals remain bullish, keeping prices at elevated levels, BMI analysts say in a note. Tight sugar supplies are set to persist through the remainder of 2024 and into 2025, continuing to support high prices.

On Tuesday, cocoa is down 1.8% at $6,837 a metric ton, while coffee is up 1.1% at $2.49 a pound. Sugar is down 0.4% at $0.22 a pound.

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

(END) Dow Jones Newswires

November 05, 2024 07:23 ET (12:23 GMT)

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