The major pressuring factors for commodity prices amid the pandemic were the strong appreciation of the dollar and the cut in potential demand. The decline in crude oil prices, the effect on the ethanol and food industries, the risk of a global recession with widespread cuts in demand, and a very strong dollar were indicators that served to put pressure on agricultural commodities, including corn. Now, this environment is starting to change positively, and some effects on corn prices may appear in the coming few weeks. The point of contention is the ongoing harvest in the United States, in excellent conditions so far and suggesting a record production. Concerns over the exchange rate policy in Argentina are the factors that could benefit Brazil in the second half of the year.
This international currency movement is very important for commodity prices from now on. A weaker dollar and reasonable increase in global liquidity can trigger a price surge for commodities. In these movements of high liquidity and weak dollar, the dollar prices of commodities end up gaining strength regardless of their supply and demand. Of course, we will need an aggressive resumption of global demand and all other economic factors such as recovery in growth and employment.
Crude oil prices aligned at USD 40 a barrel again, closer to the pre-coronavirus period, when prices were between USD 50/60 a barrel. A resumption of U.S. economic activity would bring fuel demand back to a better level, which provides support to the ethanol industry to restore production. This would improve the short-term demand environment for corn, and this better flow could help prices to have volatility between USD 3.20 and 3.45 a bushel on the Chicago Board of Trade.