Home Commodities Analyst: Commodity markets in the ‘doldrums’

Analyst: Commodity markets in the ‘doldrums’


KANSAS CITY, MISSOURI, US — With multiple factors pushing commodity prices in 2023 to some of the lowest in the last decade, the markets are now in a period of “doldrums,” according to one analyst who spoke with World Grain.

“We’ve had three unbelievable years of prices and volatility, and everyone’s gained or profited from that, so we’re due for a little bit of a breather,” said Stephen Nicholson, executive vice president, global sector strategist-grains and oilseeds, Rabobank. “That’s the way the markets work. I just don’t think we have a lot of downside left, and we don’t have a lot of upside either, to be honest. That’s why I kind of call it the doldrums.”

Corn futures on the Chicago Board of Trade were down 31% for the year, while wheat contracts fell 21% and soybeans dropped 15%, according to Bloomberg.

But while 2023 was defined by substantial declines in commodity prices, 2024 is not going to see that same trend continue, said Tanner Ehmke, grains and oilseeds economist for CoBank.

“There will be pressure on commodity prices, but we’re not going to see that similar decline,” he said. “You’ve got some fundamentals there that are going to put a stronger floor under commodity prices in the year ahead.”

The drop in 2023 was one of the largest declines since 2013-14, following the 2012 drought, but the reasons for the decline are different this time, Nicholson said. For one, Russia had a near record wheat crop this year, following a record crop last year.

“And they just keep selling it on the world market,” Nicholson said. “The two big buyers, China and India, are more than willing to buy it and buy it cheap. That’s kind of put the kibosh on the wheat market.”

In the corn and soybean markets, a record crop in Brazil and a decent crop in the United States have rebuilt global stocks, which quieted any market concerns, he said. 

There are logistics problems all over the world, from low water levels on the Mississippi River and in the Panama Canal to political unrest in the Black Sea and Red Sea regions. 

“That translates back into cheaper prices because any price appreciation is getting sucked by insurance or freight costs,” Nicholson said. 

Money flow is also a contributing factor, he said, noting that money has come out of commodities and gone back into stocks and bonds. 

Nicholson foresees a sideways pattern for now, but that will depend on a few factors, including South American production, particularly the Brazilian corn and soybean crop.

“Wheat has the most upside to me, corn is at the bottom and soybeans could go either way, depending on how that demand holds up going forward,” Nicholson said.

Ehmke said if the weather in South America continues to be a problem in that region, production could drop.

“Soybean prices would remain fairly strong because of our rising domestic usage, driven by renewable diesel,” he said.

Brazil is likely to see a reduction in corn acreage simply because of the late planting of the soybean crop.

“That’s going to shorten the growing season for the spring corn crop,” Ehmke said, adding that corn production in Brazil could decrease 5%. “But that number may be conservative.”  

Nicholson still expects market volatility with a fairly wide range of trading, providing opportunities for buyers and sellers.

“It may not be the opportunity you wanted, it may not be as low as you want or as high as you want, but there will be some opportunity there,” he said. “Don’t get complacent.”

Volatility will continue to be an issue as will geopolitical challenges.

“It seems like every other week or month there’s another challenge we have to worry about,” Nicholson said.

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