Article category: Consumer Goods, Science & Technology
Market Insights Week of January 22, 2024
Descartes Labs Market Insights for the Week of January 22, 2024.
Article category: Consumer Goods, Science & Technology
Market Insights Overview: Descartes Labs' advanced geospatial insights uses quantitative models for the most accurate price forecasting, and involves a rigorous process from a broad library of forecasts in agriculture/industrial production, weather and human activity. In this blog, we provide you insights on the current week's market.
*Disclaimer: This blog post and related information is provided by Descartes Labs, Inc. (“Descartes Labs”) and was prepared solely for informational purposes. It is based upon or derived from information generally believed to be reliable, but no representation is made that it is accurate or complete. Descartes Labs accepts no liability with regard to the use of or reliance on it, and it should not be taken as investment, trading, or other advice.
Our latest commentary was issued more than one month ago. The job creation and unemployment numbers have been disappointing over August and early September, pointing to a slow down in the US economy growth. At the same time, the August inflation number came up at 2.5% (including food and energy) (+3.2% without) opening the door for the FED to lower rates.
Indeed, it is the expectations of a 0.5% rate cut in this week September FED meeting that weighed on the dollar last week. Dovish comments today from former New York Fed President Dudley knocked bond yields lower and weighed on the dollar when he said he sees “a strong case for a 50 bp cut” in interest rates at next week’s FOMC meeting. Strength in the yen also undercuts the dollar as the yen jumped to an 8-1/2 month high against the dollar today. The markets are discounting the chances at 100% for a -25 bp rate cut at the Sep 17-18 FOMC meeting and at 48% for a -50 bp rate cut at that meeting.
Outside the US, ECB President Lagarde said she is open to considering an interest rate cut in October if the Eurozone economy suffers a major setback, but a cut at the December ECB meeting is more likely as we will have more comprehensive information available on the economy by then.
September WASDE was released on September 12th and was relatively uneventful from a price move perspective.
Last week Descartes Labs forecast had been mildly bullish and was inline with the price move we observed last week. The outlook is for further moderate support for corn prices in the coming weeks.
The Descartes Labs forecast last week anticipated a fairly stable market but anticipates that the lows are in for soybean-meal with mostly upward support from here.
Last week's outlook was for a stable market but has recently turned bearish. The Descartes Labs anticipates further weakness. The forecast trajectory indicates a minimum above 35 cts/lb before the potential for a rebound.
The benchmark palm oil contract for November delivery on the Bursa Malaysia Derivatives Exchange closed down 53 ringgit, or 1.36%, at 3,848 ringgit ($888.07) a metric ton. India is considering increasing import taxes on vegetable oils to help protect farmers reeling from lower oilseed prices, two government sources told Reuters last month.
India’s palm oil imports in August fell more than a quarter from a month ago, primarily driven by sufficient domestic stocks and negative margins that discouraged refiners from purchasing more of the tropical oil, a leading trade body said on Thursday. Palm oil has been losing competitiveness because of falling soyoil prices, said Anilkumar Bagani, the research head of Mumbai-based Sunvin Group. As can be seen on the differential chart below, the soybean oil premium has kept going on, pressuring palm oil even further. A cargo surveyor said on Tuesday exports of Malaysian palm oil products for Sept. 1-10 fell 4.6% to 448,985 metric tons from a month ago.
The Descartes Labs model anticipated some minor price correction last week. However, from the current lows, the most recent outlook is more supportive and the model sees a potential rally back towards 3900 myr/mt for the Nov-24 contract.
The Descartes Labs forecast had anticipated some of the early weakness from last week but not the rebound we observed on Thursday/Friday. From here, the outlook is for a stable market for the next couple of weeks.
White sugar: London sugar posting a 1-week high on Friday. Sugar prices have been under recent pressure on optimism that above-average monsoon rains in India will lead to a bumper sugar crop. The Indian Meteorological Department reported today that India received 849.3 mm of rain during the current monsoon season as of September 13, or 8% more than the comparable long-term average of 784.3 mm. India's monsoon season runs from June through September.
Descartes Labs forecast last week for white sugar anticipated some short-term support and did not anticipate the drop we saw mid last week. The outlook is for moderate support in the short-term. The model sees some potential for further gain heading into October.
Late last month, NY cocoa rallied to a 2-1/2 month high due to concern that excessively dry conditions in West Africa could curb the region's cocoa production. Forecaster Maxar Technologies recently said that top cocoa-producing countries Ivory Coast and Ghana had seen a "significant decrease in shower activity" over the past month, leading to below-normal soil moisture and limited crop growth.
Last week Descartes Labs forecast for London cocoa was bullish, anticipating a rally back towards 6,000 gbp/mt for the Dec-24 contract on the back of strength for the New York cocoa market. As London cocoa failed to rally as expected, the outlook cooled down on the short-term and the outlook is for a stable market into the end of the month, before the potential for a rally in early October.
Last week Descartes Labs Arabica forecast was bullish although it did not anticipate such a strong move up. As a result, the outlook is now more moderate over the short-term, but still remains mildly supportive.
Robusta: Nearest-futures (U24) robusta soared to a record high. Robusta coffee has support after typhoon Yagi struck Vietnam on Monday, which may have damaged the country's robusta coffee fields. Also, ICE-monitored robusta coffee inventories on July 25 rose to a 1-year high of 6,521 lots, up from the record low of 1,958 lots posted in February 2024.
Last week Descartes Labs Robusta forecast was also directionally bullish towards 5300-5400 $/mt for the Nov-24 contract. From those elevated levels, the outlook is now range-bound around this 5300 $/mt level.
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