IGI Logo

Crop & Chemical Dashboard: Grain prices under pressure

International prices of major grains—corn, wheat and soybeans—corrected further last month amid indications of ample supply. Commodity traders have increased their short positions on these three grains to the highest levels in almost 20 years. In the chemical markets, data points reflect continued softness overall, with output growth still muted and prices lower yoy. A meaningful recovery likely remains at least two quarters away.

Chemical industry data points indicate continued softness

India’s exports of organic and inorganic chemicals fell 6.5% mom but rose 0.3% yoy in January 2024, while imports dropped 13.7%/18.0% mom/yoy. US chemical production for January 2024 was lower by 1.3%/0.2% mom/yoy, while chemical railcar holdings—a measure of volumes—increased 3.4% yoy on a 13-week moving average basis for the week ending February 17. US data indicates continued softness in pricing, with chemicals producer prices down 5.7% yoy and import prices down 1.8%/2.2% mom/yoy. In Europe, chemical output rose 1.7% yoy but fell 2.9% mom; capacity utilization remains low at 74.7%. Certain end-use industries such as dyes & pigments are showing early signs of recovery, whereas others such as agrochemicals continue to destock, and a recovery is still two quarters away.

Agricultural crop price cycle has weakened

US futures prices of corn, soybeans and wheat softened another 4-6% sequentially during the past month and are down 24-34% yoy. The weakness is due to rising supplies in the global market. Commodity traders have increased their short positions on these three grains to the highest levels in almost the past 20 years in expectation of a global supply glut. In contrast, farmers are holding on to their stocks (to avoid selling at depressed prices) and are believed to be reducing corn and wheat acreages in the US by 4-5%. This could potentially drive a rebound in grain prices, particularly if climate or geopolitics turn adverse. In India, however, the correction in crop prices has been considerably less significant than it has been overseas. Rainfall remained deficient across most of the country in February, while reservoir levels remain low in south India.

Chemical price trends

Softness in chemical prices continues in general, although sodium nitrite and chloroform prices did tick up 13-14% mom in January 2024. Soda ash spot prices in China have corrected in recent weeks after a short-lived spike, while soda ash import prices into India, too, remain weak. International phenol spreads remain below their decadal average despite certain production outages globally. Prices of Atul’s key product categories, including 2,4-D herbicide, p-cresol and epoxy resins, remain soft, whereas sulfur black has recovered somewhat off a depressed base. In refrigerants, average prices of R-134a have increased in recent months, although the rise seems attributable primarily to a favorable mix shift. R-32 prices have softened, whereas R-22 prices have firmed up modestly of late.

Above views are of the author and not of the website kindly read disclaimer