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Activity of forward sales of harvest 2020 is significantly lower than last year - opinion

31.05.2020

The activity of forward sales of crops this year is significantly lower than in the previous one.

Such an opinion in a comment by Latifundist.com was expressed by an analyst with Agritel International Alexey Eremin.

“The main sellers of forward contracts are large agricultural holdings in which these sales are embedded in the company's strategy, both in terms of risk management and cash flows. Medium and small producers this year almost did not conclude forward contracts. And many large traders did not show high activity, ”said Alexei Eremin.

In his opinion, one of the reasons is the topic with the unpredictability of the market due to the epidemic of the coronavirus, and others - the weather and price level.

As the analyst pointed out, many producers, primarily small ones, cannot be completely sure of the volume of the crop that they will collect based on weather conditions, which keep everyone in suspense this year. And those partial volumes that they could offer are not very interesting for grain traders.

In addition, according to Alexei Eremin, the greatest activity in forward sales was observed at the end of January-February, when prices for new crops were quite high, then after the market fell, sales mostly stopped.

“Of course, it’s probably most psychologically difficult for producers with forward sales of corn, where the price of a new crop is about $ 145 per ton CPT, while on the spot for the old they yield more than $ 170 per ton. There are hopes for a revival of the oilseed market after the cancellation of“ soybean corrections, "in any case, to increase the market liquidity on the demand side," added Alexei Eremin.

Recall that export quotes for Ukrainian corn remain at a high level, despite weak external demand. The need to purchase corn for shipments under previously concluded export contracts supports prices.

Source Latifundist.com