Compared with other commodities lately, agriculture markets are still stuck in the doldrums.
While gold to oil and copper to iron ore have climbed this year, agriculture prices are lagging behind. The Bloomberg Agriculture Subindex of eight different crops, which rose the previous four days, is still down 2 percent in 2016. It slumped to a seven-year low last week amid bumper global harvests of grain and soybeans.
Big crop supplies may not go away any time soon. The European Commission predicted on Tuesday that wheat inventories next season in the 28-country bloc will climb to an eight-year high. While investors are betting that global gluts of oil and copper could start to ease, money managers are the most bearish on agriculture since at least 2006, according to a Bloomberg gauge tracking net positions across 11 farm commodities.
“It’s just a gloomy outlook for agricultural commodities,” said Benjamin Bodart, a director at farm adviser CRM Agri-Commodities in Newmarket, England. “For maize, wheat and even for beans, funds are near record-level short at the moment. There is still this feeling of an oversupplied market.”
Crop futures declined on Tuesday in Chicago and Paris before a U.S. Department of Agriculture report Wednesday. Analysts expect it to forecast a record Brazilian soybean harvest and larger global inventories of corn than previously estimated, Bloomberg News surveys showed.
It will probably take a weather problem in a major producing region to spark a rally in grain prices, according to Bodart. While traders are monitoring dry weather developing in the U.S. Great Plains, the situation probably isn’t serious enough yet to cause widespread damage, he said.
“The markets are just waiting for a weather event to be concerned about,” Bodart said. “If we haven’t got any sort of big issues in big, key exporting countries, we don’t see why prices should rally.”