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FxWirePro Commodities Watch (Grains and Oilseeds)

Background:

Understanding commodities are vital to gauge the performance of other asset classes such as bonds, equities, and even currencies. Since, 2014, any regular follower of financial markets would be able to recall that how devastating the drop in oil prices has been for many countries like Russia, Brazil, Mexico, and Malaysia whereas net importers of oil like India have largely benefitted from it. Hence, it is of utmost importance to investors to keep a tab on the trends in the commodities market.

Historically speaking, a rise in commodity prices has triggered a vicious chain reaction. First, the prices of commodities go up, which in turn triggers a rise in inflation, which again has historically triggered selloffs in bonds, which has not been good for equities in some cases.

In this Commodities Watch we present to our readers, the performance of commodities, which in turn decide the wellbeing of many commodity producing and consuming nations. For example, the price of Cocoa is extremely important for Ivory Coast, which is the biggest supplier of the commodity.

For another Example, India imported record wheat in 2018; hence, the wheat price was of utmost importance for inflation in India.

Biggest producers:

  • Rough Rice – India, China, Indonesia, Bangladesh, and Thailand
  • Soybean – United States, Brazil, Argentina, China, and India
  • Canola oil – Indonesia, Malaysia, China, the European Union, and the United States
  • Corn – United States, China, Brazil, India, and Argentina
  • Wheat – China, India, United States, France, and Russia
  • Oats – Russia, Canada, Poland, Australia, and Finland

Biggest Consumers:

  • Rough Rice – China, India, Indonesia, Bangladesh, and Vietnam
  • Soybean – China, United States, Brazil, Argentina, and the European Union
  • Canola oil – China, the European Union, India, the United States, and Indonesia
  • Corn – United States, China, European Union, Brazil, and Mexico
  • Wheat – European Union, China, India, Russia, and United States
  • Oats – European Union, Russia, United States, Canada, and Australia

Influencing factor:

  • China is having massive impact in the Agricultural commodities. The rapid depletion of China’s hog stocks has significantly reduced demand for grains from China.
  • Moreover, the U.S. China trade war impacting China’s buying of agricultural commodities.
  • However, President Trump’s assurance of a government buy to support prices successfully placed a floor on grain prices.

2017 performance:

In this article, we evaluate the performance of the grains and oilseeds, which are consumer by almost entire world.

  • The best performer of this pack was Rough Rice (21.3 percent); it didn’t perform too well last year. In 2016, it was down more than 21 percent.
  • After being the best performer in 2016 (14 percent), Soybean was down by 3.4 percent in 2017. The market is suffering a supply glut in Soybeans along with lower demands from China.
  • After rising around 4 percent last year, canola oil was down 2.4 percent in 2017.
  • The price of corn is down 2 percent in 2017, after rising just 0.28 percent in 2016.
  • The price of wheat was down more than 12 percent in 2016, and in 2017, it was up 1.1 percent so far.
  • After rising 8 percent in 2016, Oats was up 5.6 percent in 2017.

In 2016, this pack was down 1.6 percent on an average, but in 2017, it was up 3.3 percent.

2018 performance:

In 2018, Wheat was the best performer with +16.3 percent gain, followed by Oats (+13.3 percent), and Corn (+6.7 percent).

The worst performer has been Rough Rice (-14.6 percent), followed by Soybeans, which was down 7.4 percent, and Canola oil (-1.55 percent).

In 2018, the pack was up 2.1 percent.

2019 performance:

In 2019, Corn the best performer with +17.6 percent gain, followed by Rough Rice (+14.1 percent), Oats (+5.9 percent), Wheat (+5 percent), Soybeans (+1.7 percent), and Canola oil (+0.2 percent).

President Trump’s assurance to buy commodities to compensate for China buying is pushing prices higher.

In 2019, the pack is up 7.4 percent. The pack is up 3.3 percent since our last review, a month ago.

 

 

 

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