Even as prices of oilseeds and pulses have rallied in the domestic market in recent weeks following unseasonal rains and occasional hailstorms during March and early April that damaged part of the Rabi harvest, the picture is different at the global level.

Worldwide, agricultural commodity prices have remained largely stable in April and the production outlook for the coming months is positive. Indeed, prices of staple grain such as wheat and animal feed such as corn and soyameal actually fell by about 3 per cent month-on-month while vegetable oils and sugar remained largely unchanged.

Grain prices

Barring India, weather at major origins has stabilised and turned benign. Dry weather in the US Midwest has encouraged accelerated corn plantings and raised expectations of good yields. At the same time, showers in the southern plains have improved the outlook for the US wheat. Eastern Australia too has experienced precipitation.

Grain prices continue to be under pressure not only from prospect of another large harvest in the northern hemisphere, but also rising expectation that Russia would sooner rather than later remove the export duty. In the event, supplies would increase further. No wonder, speculators have turned bearish on grains. This is evidenced by the record number of short positions held by non-commercials on the bourses.

Brazilian connect

Simultaneously, good weather in Brazil in recent months has created a positive outlook for sugar and coffee production. Cane harvest in Brazil – the world’s largest producer and exporter of sugar – has already started and crushing is gathering pace. With India and Thailand holding large stocks, sugar supplies for the coming several months look secure. Simply put, there is hardly any bullish factor on the horizon that can trigger a sugar price rally.

As for vegetable oils, the demand is sluggish even as availability is abundant and prices are decidedly consumer-friendly. In Brazil and Argentina, soyabean availability is at record levels. However, logistics problems in Brazil and port strike in Argentina have slowed down the pace of shipments.

Palm oil under pressure

Palm oil production is up month-on-month in April as the market has entered the peak production season which will last till October. Prices have declined by over 5 per cent in recent weeks and crude palm oil is currently offered at $615 a tonne from Indonesia. Going forward, palm oil market is expected to be under pressure given rising production, expanding inventory, sluggish demand and loss of discretionary blending for biodiesel. Low crude prices continue to depress palm oil.

Some weather forecasters are talking about incipient signs of El Nino in South-East Asia. Last year, the weather phenomenon turned out to be a mild one, despite predictions of a severe one. An interesting aspect of El Nino many analysts are unaware is that whenever South-East Asia faces El Nino conditions, North America usually enjoys excellent spring weather which in turn boosts the prospects of grains and oilseeds. It has happened several times in the past, the last one being 2014.

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