Grains, oilseeds and soft markets were awash in price-influencing world events and domestic data last week. The single largest market mover proved to be the violent political uprising in Libya, a grain importer and a crude oil exporter. With the holiday-shortened trading week, agricultural futures came crashing down last Tuesday with limit losses in Chicago wheat, corn, oats, rice, soybeans and soybean oil. Major equity indexes also plunged on the global jitters while gold prices rose and crude oil futures topped $100 a barrel last Wednesday for the first time since 2008. On Friday, agricultural futures came roaring back with limit gains during the session in several contracts on short covering and strong export sales.
While the political unrest spreading across the Middle East and North Africa have little directly to do with food, it certainly has had an impact on commodity markets as most of the grain-deficit countries in the region have been more active than usual in seeking foreign grain to ensure adequate supply. Last week Egypt, Tunisia andthe United Arab Emirates bought wheat, Saudi Arabia and Morocco sought wheat, and Iraq and Lebonan tender this week.
At the same time, economic conditions in the West African nation of Ivory Coast, the world’s largest cocoa bean producer, were in shambles as the incumbent president, still in control of the military, refused to yield power to the internationally recognized winner of last fall’s election. Banks were closed, cocoa and coffee exports were banned and economic sanctions from major trading partners were in place and violence escalated. Cocoa futures prices rose to 32-year highs in New York while cocoa powder prices held at already historic highs.
On a calmer note, near week’s end the U.S. Department of Agriculture issued long-term production forecasts at its Agricultural Outlook Forum 2011. While initial data had been released a week earlier, updated forecasts were given at the Forum. Despite the long-term nature of the data, most in the trade focused on the upcoming year, which showed more U.S. corn and soybean planted acres than expected. Earlier in the week private analysts forecast record soybean production of 72 million tonnes in Brazil.
The breaks in grain and oilseed futures prices provided buying opportunities — flour bookings were heavy — as most markets entered last week at or near two-year highs, the added volatility created by the news and data was less welcome. One trader said of the futures price swings last Wednesday, “It’s almost nauseating.”