The fall did.
An extraordinary week, with unique volatility, has ended. Quotes of cereals and soybeans, after a surge on Monday at the first responses to the presidential elections in Turkey, rushed down, setting "speed" records. As a result, CME volatility increased sharply compared to the previous week: for beans by 24%, for corn - by 20%, and for wheat - by 64%. Rice quotes were in the lead - plus 67%. For corn and wheat, the driver is clear - the extension of the “grain initiative”. Soybeans - expected peak harvests in Brazil and the US and pressure from the vegetable oil market. There, the competition of suppliers (especially sunflower) has driven prices and quotations to unprecedented parity with palm. A little added pressure on quotes and the growing dollar index: the market is growing optimistic about increasing the borrowing limit in the US.
But the fall in rice quotations, which is not directly related to the shipment of cereals from Ukraine via the Black Sea (there is no merchandise export either from there or from Russia), is out of trend. The price reduction cannot be explained only by a change in the dollar index. Actually, therefore, the accuracy of our forecast is uniquely high for corn and wheat over the past week, a failure for rice - 36% (see diagrams). For ten days, rice quotes from a maximum of $18.365\cwt ($362\t), reached on May 8, fell by 7.1%. Maximum - since August 2008! By last May, the prevailing growth was 18%.
April's 2.9% gain in crude prices was understandable: concerns about production due to the growing likelihood of an El Ni?o, in which the temperature of the Pacific Ocean in the central and eastern part will rise above normal. Therefore, producers and traders in Thailand and Vietnam have begun to anticipate a possible drop in yields now.
Prices for 5% Thai rose to $500/t from $498-$500 last week, the highest since January.
The price for the reference rose to $515 per ton, this is the third month of growth. If it exceeds the January peak of $523 per ton, it will be the highest in more than two years. Vietnamese 5% is traded at $485-495 per ton.
Last Friday's USDA WASDE set production for 2023/24 at a record 520.5 million tonnes, up 2.2% from the previous season. Most of the increase in production is accounted for by Bangladesh, the European Union, China, Pakistan and the United States. Global consumption in 2023/24 is projected at a record 523.0 million tonnes, up 1.5 million from a year earlier, with most of the expected increase in demand coming from South Asia. As usage is projected to once again exceed global production, global ending stocks in the 2023/24 marketing year will fall by 2.5 million tons to 166.7 million, marking the third consecutive year of declines in global rice stocks. The balance will be the lowest since 2017/18.
Since we do not find other triggers, we would venture to suggest that the fall in quotes over the course of 4 sessions was a reaction to the increase in production given in WASDE. Since the figure is not very significant, and the baht against the dollar is at a monthly minimum and has clearly reached a plateau, we can expect a rebound in quotes this week.