(Bloomberg) -- Crop giant Cargill Inc. says there’s still a bullish picture for most agricultural commodities, despite weaker demand from China that’s seen corn purchases collapse.
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Wheat supplies remain tight and the outlook for palm and other vegetable oils is positive in part due to strong biofuels demand, according to Alex Sanfeliu, who runs Cargill’s World Trading Group. But short-term demand weakness in China is putting pressure on soybeans as crushing plants in parts of the nation halt or slow activity amid an energy crunch, he said.
The comments from the top crop merchant are more pessimistic than in April, when Sanfeliu predicted a “mini-supercycle” in most foodstuffs. Prices surged over the following month, driven by a Chinese buying spree and demand for crops used in biofuels. That also whipped up volatility that traders crave, boosting profits, though markets have eased in recent months.
“China is less of a bull engine compared to last year, and potentially will be a bearish one here in the short term,” Sanfeliu said in an interview. “We still have that situation where any supply disruption or significant change in demand can bring big moves. We are in a mixed environment, but still a healthy one.”
China’s energy woes are crimping demand for soy amid power cuts to crushing plants and an oversupplied pig sector. That’s causing corn imports in the top commodity consumer to “completely” stop and imports to collapse, he said.
In the next three to six months, regulatory policy in biofuels and volatile energy markets will likely be the biggest price drivers, according to the Cargill veteran.
Crop prices could rally if energy demand spikes amid low supplies of natural gas and a cold winter, Sanfeliu said. Higher fertilizer prices caused by the energy crisis could see farmers switch from wheat to other less nutrient-intensive crops. That could add pressure on already tight wheat stockpiles.
While trading has proved “a bit more difficult” lately, Sanfeliu said the company’s trading desk was performing just as well as it had in the first quarter of the previous year. The bulk of Cargill’s record performance in 2020 came in the second and third quarters.
“It’s a strong start,” he said. “It’s the same as last year and way stronger than previous years.”
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