The latest prices and key trends from the SM Commodities Index.
Copper prices strengthened over the past month, reflecting a weaker dollar and optimism over the easing of some of the zero-Covid policies in mainland China, according to S&P Global.
Markets are pricing in an imminent rebound in mainland Chinese demand at a time when inventories remain exceptionally low and supply tight. Our view is that the actual recovery in physical demand will take several months to materialise and will be offset by a combination of slowing demand in Europe and the US and rising production in the Democratic Republic of Congo, Chile and Peru in 2023, with prices returning to the $7,400-$7,500/mt range over the first half of next year.
Soybeans have almost recovered values of three months ago over the past weeks. The annual change of the commodity is in line with other major crops such as corn or wheat, but the latest rally responds to many factors.
First of all, China reopening its domestic economy and abandoning zero-Covid policies are an indication for increased demand, especially as crush margins return to positive range in the Asian country. The US is taking advantage of its export window before Brazil comes into the market with a record crop expected at 150 MMt.
In this sense, export inspections are within market expectations. Second, negative weather in Argentina suggests a third year of La Niña will impact on soybean yields, increasing the risk of a shortage of beans for crush in the world’s biggest oil and meal exporter in 2023.
Third, perspectives on the Fed's next decision on interest rates and persistent inflation may have an impact on funds’ trading strategies, which may use the commodity as a hedge against possible changes in monetary policy.
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