Trends are upward in agricultural commodity prices for 2020

After months of volatility, with a sharp drop in prices until April, mainly due to tensions with the trade war between the United States and China and high levels of global inventory and supply, projections show an upward trend in prices of corn and soybeans, which should continue, at least, until the first quarter of 2020. This was one of the conclusions of the most recent semi-annual report by Costdrivers, World and Brazilian Macrossector Scenario.

“While the outlook is for stability in oil prices and a recovery in global iron ore production, agricultural commodities are expected to rise, especially in the prices of corn and soybeans, considering a scenario with the real still depreciated against the dollar and the possibility of a corn shortage at the beginning of the year due to the low level of stocks”, assesses Erick Boano, vice-president and founder of Costdrivers.

See the price behavior of the main inputs for the year 2020:

Gasoline and Diesel: For next year, international factors linked to the market are still a point of attention, and there may be reversals in the trend as a result of possible events. However, the forecast so far is for stable prices with small increases.

Ethanol: Due to the perception of improvement in the Brazilian economy and the reduction in international uncertainties throughout the year, ethanol production and consumption present favorable prospects in the national and international markets.

Corn: The corn production scenario gained uncertainty after the climatic conditions in the United States, with behavior linked to that of other commodities, such as soybeans.

Soy: The possibility of an agreement between China and the United States increases expectations of large Chinese consumption, which could increase international soybean prices.

Sugar: With the expectation of greater demand for next year, stocks are expected to decrease. Greater production is also part of expectations, generating predictions of a mild price increase.

Fertilizers

The performance of the fertilizer industry depends mainly on the performance of agricultural activity. According to the Institute of Applied Economic Research (Ipea), Agricultural GDP will be greater than 1,4% in 2019 and for 2020 the estimate is that the sector's GDP will grow by around 3%. This perspective, together with the Brazilian macroeconomic condition, should favor the fertilizer industry.

metals

The fall in ore prices and signs of a possible resumption of demand for steel indicate an improvement in expectations for metallic commodities in 2020. On the demand side, an improvement in the search for long and flat steel is expected thanks to the expectation of acceleration of the automotive and civil construction sectors. The measure announced by the President of the United States, Donald Trump, which determines the return of tariffs on Brazilian steel and aluminum entering the country, could harm the metal export market, if confirmed.

Aluminum tends towards stability, with no expectations of considerable warming in the world economy. The trade impasse between China and the USA represents a subtle upward trend with expectations of an agreement that will result in an increase in Chinese imports. For copper, futures contracts show price levels similar to those current in January 2020, and expectations are for stability for the year. Chile stands out in the analyzes as the prolongation of its crisis could affect global supplies.

Paper

For cellulose, there is an expectation of stable prices, with slight upward trends for next year due to several national and international producers who have already announced intentions to reduce production. The impact of these measures, however, still depends on the scope of the impact on production.

For the stock, there is an expectation of price maintenance, however, any change in the factors mentioned above could change the trend. On the Kraftliner side, the positive trade balance scenario is expected to remain for 2020, with a tendency for slight price increases.

Chemicals

As is present in practically all other industries, the growth of the world economy is essential for the good performance of this sector. The IMF's outlook for global GDP growth, however, shows signs of deceleration, with a reduction in projections for 2019 from 3,2% to 3,0% and, for 2020, from 3,5% to 3,4%. %.

The reversal of this scenario depends, mainly, on the progress of negotiations between China and the United States. In Brazil, pension reform and tax reform are points that tend to improve prospects. The ideal condition, however, for the industry to truly regain competitiveness is the approval of the free gas market, which, despite being in progress, has no prospects for becoming effective.

Plastic Resins

For NAFTA, prices in 2020 are expected to follow the trend in oil prices and their geopolitical context, with the main factors to be monitored next year being global uncertainties, in particular the trade war between the United States and China , and a gradual increase in Asian and Brazilian demand, in addition to the possible maintenance of the oil production cut by OPEC producing countries.

In the case of resins, despite the drop in volumes and prices in 2019, it was possible to see a recovery from the 2nd half of 2019, with the continuation of this trend depending on the resolution of international uncertainties, with, for now, a projection of fall or stability in prices.