00:07welcome back you're with us on big c on cnbc tv 18 prime joining me now is carlos mira he's
00:12head
00:12of agri commodity market research at rabo bank carlos hi thank you so much for joining in i
00:17remember our previous conversations where you said that it's going to be geopolitics and not so much
00:21supply and demand that would shape the global agriculture market in 2026 how are you looking
00:27at the prices till time well yes certainly for grains and all seeds that's still the case
00:35however probably the biggest story in the last few weeks has been on the soft or softer commodities
00:43like sugar coffee and cocoa and the price declines and of course those more obscure commodities they
00:54have not been that much affected by geopolitics recently they have some effects especially
01:02coffee and and cocoa in 2025 because of the u.s tariffs but certainly the recent declines
01:11have little to which politics and much more with the supply demand and expectations going forward
01:19you mentioned about sugar and how are you looking at the production consumption and the fundamentals
01:24there and because the prices are trading just about sub 14 cents right now
01:33well in the sugar market we come from a rather significant deficit in 24 25 they had already finished
01:45that season finished um but the balance sheet is moving to uh surplus if you ask me that surplus is
01:53not overwhelming which is what you would normally expect if you look at the price
01:58uh today uh so so in principle we're expecting a surplus of 3 million metric tons that's not huge it's
02:07significant but certainly not huge however if we had to make expectations for years further in the future
02:15we probably also have small supplies ahead as well if you ask me the market seems to have overreacted funds
02:23are very very well sold funds are then the shortest they've been since 2019 and uh you know that surplus
02:33at the moment doesn't look overwhelming it doesn't look overwhelming because um ethanol prices in brazil are
02:41relatively high so we are not going to have a maximization of the sugar mix it's likely going
02:47to stay high but not total max um and if we look at the seasons farther in the future like
02:55for example
02:56thailand or you know even the u for certain but even maybe brazil the sugar area is expected to decline
03:07um now that expectation for a dropping area clearly does not seem to be threatening threatening enough
03:17to to lead to a price increase today but it's likely to be in effect in the coming months
03:25with all of that uh number what's your sense on where are the sugar prices going from here do you
03:30see any
03:30support at all because 2025 was a weaker year and this year it started on a bearish note
03:37yeah yeah we've seen uh very low prices below 14 last week and uh last week we saw the lowest
03:45prices
03:46since uh 2020 and of course that was that was with coffee them very very depressed energy prices at the
03:53time um i think it's very reasonable to expect at least half a cent increase in the forward curve and
04:03especially towards the end of the year i think um at the moment everything brazil in terms of weather
04:10looks really really cute but you know i are in the future that's unlikely to continue to be the case
04:18uh there's always some threats of dry and dryness and heat uh that's likely to be the case i think
04:27the
04:28market has been minimizing the declining area potentially in thailand but also in the eu i think
04:35in the u is is almost a given that the area will decline by at least five percent we've seen
04:41big
04:42losses across the eu sugar sector of course cost of productions are very high so that declining area
04:50should be taken as a given even though will only be seen in the spring plantings
04:56so half a cent uh going forward i said that there's potential for one cent if el nino
05:06materializes expected towards the end of the year and we see adverse weather conditions in maybe in
05:12india maybe in thailand from sugar to coffee then and here as well it's a second straight year of price
05:20decline down 16 in this year while we are looking at better production numbers would you say that
05:25a bearish trend is what perhaps this year will look into too
05:32yeah so the forward coffee balance sheet is expecting a big surplus uh in the 26-27 season
05:41that will start with a big increase in production out of brazil arabica production out of brazil
05:48robusta mitropa paper overall a large increase could be in arabica eight million bags more
05:57and that translates fairly um one to one to a global surplus uh in in in that 26-27 season
06:09um
06:11so expectations in the sugar in the coffee market uh bearish and it's very hard to move from there
06:19that crop is in very good weather um you know we still would like to see another two months of
06:26fairly
06:27rainy weather but then you know in april even march it starts to get rain in brazil normally so we
06:35only
06:35really really need rains until march and then you know it's pretty much a given that we're going to
06:40have that big jump in production um however the uh immediate term is still very very tight until that crops
06:52comes in and that crop is harvested uh june july august and it's only exported uh and reaches destination
07:00only really from october onwards so until then i think this potential for a lot of physical tightness
07:08and even though we've seen uh this peak declining prices
07:12even today plays a very weak and dropping quite a bit um but this um potential for a short-term
07:23pullback
07:24i will say we've seen quite a bit of gradings a coffee to be certified and and potentially be
07:33the delivered against for example the match contract um that is happening but those trades have been
07:42locked at much higher prices and a much higher front month premium um seen in the around december for
07:52example um and i think the the physical market continues to be tight so this i will say potential for
07:59short-term pullback but certainly if we look at prices towards the end of the year i i think prices
08:07will remain um will likely be trading at well below three dollars per pound by the end of this year
08:17and what do you also think about soybeans because amongst many of these soft commodities
08:21soybean seems to be doing quite well and the only news that seems to be really supporting is china
08:26buying u.s soybeans strong numbers for this season and the next
08:33well that's a purely geopolitical play uh we see chinese buying yes um but that's um
08:44it's very uncertain how much china will continue to buy i think we need to place ourselves in
08:51uh the mind of the chinese government and and and and and the mind of american farmers and yeah from
09:00the
09:02from china's perspective they are probably okay to buy some so i mean from the u.s even though it's
09:09not
09:09economical but for reserves it could make sense if that leads to american farmers planting more soybeans and
09:19guaranteeing relatively low prices um for another year that's a very likely scenario but china might not
09:28want to buy huge quantity from the us going forward i think it's it's china would like to have a
09:38diversified
09:39buying base but you know it's also quite comfortable buying the lion's share from brazil and that has been
09:49the case the dependency of china from brazil has been growing and you know i don't see much change yes
09:59buying a few million tons from the us trying to keep american farmers planting soybeans but um
10:06um i i don't see any big potential for a price spike in soybeans um stocks are relatively good brazil
10:17is
10:18having a monster crop um generally chinese demand continues to be depressed so i i i don't see potential
10:28for a big increase in soybean prices carlos also coming on uh the fact that the various countries are
10:35intensifying their agricultural programs including the us the brazil argentina even australia for that
10:41matter in some sense how are you looking at the global agriculture map as we move ahead from here
10:48well i think 2025 was the year of the tariffs and more and more that tariff tension has been
10:58translated into a subsidy play very clear in the us i think we've seen a number of countries increasing
11:07biofuel mandates and i think we are likely to continue to see that um different countries will have
11:15different sort of far power to you know in terms of policies to support the farming sector but
11:24you know i think it's going to be much more political and on a global scale that's a bit of
11:31a worry
11:31because then you know also investments don't always follow follow as much as a politician would like to
11:38if if you need to decide on a big um biofuel refinery for example that could be a billion dollars
11:46and you
11:47depend on the policy to stay on the or or the policy ambitions to be materialized and they don't
11:54always put politics tend to be much more changing than than um underlying uh trends for example if you
12:05look at population trends they're much more reliable than uh biofield policies that can quickly change
12:12um so i think the agricultural sector as a whole has a few challenges um going forward and and certainly
12:24it's very visible when we look at biofuel prices and especially vegetable prices
12:32um that they they will continue to be very very volatile and have very
12:39different basis risks in different countries so it's not the same for example soybean oil in argentina
12:48or in the u.s because the u.s is u.s so you know it's much more favored um
12:55by the u.s policies of of
13:00a biofield production than a foreign feed stocks so we're going to see that volatility and that
13:08disparity across countries all right so well yes the global agriculture map seems to be changing but
13:15as carlos says he's slightly bullish on sugar much more uh perhaps uh when it comes to other soft
13:20commodities coffee not so much soybean prices could see some more gains going forward uh thank you carlos so
13:26much for joining in and making sense of what really is happening in the soft commodities as far as the
13:29global markets go but with that it's a wrap on this episode of big c thank you for watching
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