Piraeus Bank: New rise in the prices of agricultural products

Agricultural prices rose across the board, with cotton, corn, orange juice and soybeans leading the way, with demand strengthening despite a stronger dollar and concerns about a slowdown in global growth, the Bank said. Piraeus in the 8th Agricultural Products Price Bulletin for 2022.

At the same time, according to the bank, the continuation of adverse weather conditions that prevail globally, may continue to support their prices, as NOAA estimates speak of a possible continuation of the La-Ninia phenomenon, in the near future, however with relatively reduced probabilities (60% from 86%).

Taking into account the above, as well as the continuation of the war, the grain sector (wheat, soybeans, corn) is predicted to be favored in the medium term, however an escalation in the US-China trade issue is likely to put downward pressure on the price of soybeans. For sugar, concerns about low supplies in Brazil, as well as the restriction of import-exports may positively support its price. Limited production and low stocks of orange juice are likely to favor its price, despite subdued demand, which is also expected for cotton, with investors trying to weigh the demand outlook against a possible global slowdown. For rice, low production and stocks are projected to be a positive contributor to its price at the same time as strengthened consumption, while for cattle, strengthened supplies are likely to put downward pressure on their prices.

The index of agricultural products (+8.60%) recorded a significant increase on a monthly basis compared to the index of goods (+1.34%). The catalyst for the above movement was probably the strengthening of demand, mainly from China, as the recent financial data (imports, exports) showed a moderate improvement, at the same time as the improvement of the epidemiological picture of the country against the corona virus. Although overall commodities remain expensive due to the Fed and a stronger dollar, additional factors such as adverse weather conditions and renewed tension in Russian-Ukrainian relations may add to their positive returns. Inhibiting factors are likely to be the prospects for a possible reduction in the global growth rate, as well as an escalation in US-China trade relations.

The image of markets

Equity markets posted gains on a monthly basis (S&P500 +4.45%, MSCIEM +0.15%), as the easing of inflationary pressures in the US removed the possibility of a more aggressive rate hike by the Fed, with individual economic data remain quite positive, especially in the labor market.

In the Eurozone, the historically high inflation that forced the ECB to go on a rate hike, particularly high energy prices and uncertainty about sufficient natural gas availability, put additional pressure on economic activity as reflected in the development of leading business indicators. The dollar strengthened significantly and the yield on the US 10-year bond stood at 3.01% and the 2-year at 3.31%, with investors remaining on the possibility of a recession.

At the same time, investment interest was focused on geopolitical tensions between the US and Taiwan, the war in Ukraine, quarterly corporate results and developments in Great Britain and Italy.

See the 8th Agricultural Product Price Bulletin for 2022, in the right column “Related Files”.