(KMAland) — The first half of 2020 is in the rearview mirror and the agricultural commodity markets are likely not looking back.
Mike Zuzolo is the President of Global Commodity Analytics in Atchison, Kansas. He says the pressure on the markets began back in January.
“Not only did we have a historically-volatile market because of increased nationalism and pulling out of key multilateral trade agreements, but we also had on top of that just a historic amount of supply and demand issues brought on by the COVID-19 pandemic. And so, both of those features were demand-negative features to the market.”
As countries shut down because of COVID-19, international trade ground to a halt. Consequently, demand for agricultural commodities was hard to come by.
“We had no good idea or expectation that we could rely on for what the demand base was going to be, because the demand base continued to erode, whether it was due to political statements and frictions over the Twitter feed, or over increased tariffs on different types of commodities early in this first part of the year, or because of COVID just destroying global trade.”
Zuzolo says the markets have some reasons for optimism during the weeks ahead.
“I think we do. Between USDA’s WASDE Report and the Acreage Report, we have everything coming together, where USDA has given us fresh demand numbers and the Acreage/Stocks Report at the end of June had fresh supply numbers. Between those two numbers, we now have a pretty strong sense that we’re not going to need to fear a four-billion-bushel carryover in the corn for new crop, and we’re not going to need to fear a 600-million-bushel carryover in the soybeans.”
Given the current market prices, Zuzolo doesn’t feel a weather premium has been built into the markets yet.
“If I’m correct about that, then USDA’s near-180-bushel national yield for corn and near-50-bushel yield for soybeans may be way too high, and we’ll probably know that and have a better idea about that being too high in the next seven-to-ten days because Kansas has a large area of dry weather and dry acreage. Nebraska, the number four state in (corn) production, has a very large (dry) area as well. Even Iowa, the number one state by a long shot in terms of (corn) acres, around Des Moines, they’ve had about 25-50 percent of their normal precipitation.”