Palm oil is soaring, but the rest of agricultural markets are stabilizing


New York (awp/afp) – Palm oil prices continue their wild ride, boosted by the suspension of Indonesian exports, but the rest of the agricultural markets have stabilized, calmed by the prospect of a rebalancing between supply and ask.

Since the Indonesian government announced the ban ten days ago, the world’s most consumed oil, whose price was already near historic highs, has taken nearly 14%.

The shutdown of Indonesia, which ordinarily provides more than a third of world exports, “maintains an extremely strong market this week, with new tensions in the very short term to compensate for Indonesian decisions”, observes Gautier Le Molgat, Agritel analyst.

“On palm oil, the embargo can only be temporary, or else the country will have a storage problem”, explains Damien Vercambre, of the Inter-Courtage firm. “For now people will be living on their reserves, those who don’t have them will have to buy at full price, and we all hope that the embargo will be lifted at the end of May. If it continues, then it will be a problem .

After having picked up following palm oil, the rest of the oilseeds have settled down in recent days, at prices that are still very high nonetheless.

“We have seen the markets reach such levels and at such a high speed”, justifies Jason Roose, of the American broker US Commodities, who underlines that the effect is further accentuated by the inexorable rise of the dollar, combined with the weakening of the currencies of many major importers.

“When prices stay so high for so long, demand tends to slow down,” he says.

For Jason Roose, the phenomenon is already being felt on the meat market, with the price of American pork which has fallen by more than 16% in two weeks, under the effect of a slowdown in exports.

Favorable weather

Beyond oilseeds, the tide has turned a little for cereals in recent days, fueled by positive news on production.

In Ukraine, the professional organization UCAB said it estimated that 70% of the areas initially planned would be planted during the spring campaign, despite the continuation of the armed conflict.

“It came as a bit of a surprise,” commented Brian Hoops of broker Midwest Market Solutions. “A lot of people were worried that nothing would be planted.”

In Brazil, the National Supply Company (Conab) said weather conditions in several major producing states in April had been favorable for the second maize crop, called safrinha, traditionally the largest in terms of volume.

Another notable improvement was the weather in the “Corn Belt”, the area in the northern United States where most of the corn crop is concentrated and where heavy rains had delayed planting.

“The weather is far from ideal for planting, but a window has opened,” according to Brian Hoops.

At the same time, the rains moved to the southern Midwest, which benefited wheat, so far in dire need of water, according to Jason Roose. “It doesn’t show so much in the yards, but I’ve had farmers in Kansas tell me that the rains they’ve had for the past two, three days have been a game-changer.”

In addition, the US Department of Agriculture now estimates that cereal production in Canada for the coming season will rebound by 30% after a disastrous year, sacrificed by drought.

“As for the cereals market, the end of the campaign is approaching, and there are fewer + deals + on the market”, notes Gautier le Molgat, for whom “There is a stabilization of the market at high levels.”

“The markets are just taking a breather,” Jon Scheve of broker Superior Feed abounds with profit taking. However, he tempers, “there are always many factors that argue for an increase”.

Uncertainty remains high around Ukrainian exports. “It’s an incredible logistical challenge”, with bombings disrupting road and rail transport, which is trying to partially replace sea freight, still paralyzed by the war.

Another burning question that torments the market, “is India going to export wheat or not”, explains Jon Scheve.

Hit by a historic heat wave at a decisive period for the cultivation of wheat, the second largest producer in the world may not be able to relieve the world market, as it had expressed the wish.

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