Markets were driven in May by shifting expectations regarding monetary policy, Piraeus Bank notes in its monthly report on agricultural products.
The “higher for longer” narrative led to upward pressure on U.S. bond yields and kept the dollar strong, as expectations for immediate interest rate cuts were curbed.
At the same time, economic activity showed remarkable resilience, exceeding initial expectations and supporting corporate earnings, thereby boosting risk appetite in equity markets despite higher financing costs. At the same time, emerging markets followed the upward trend, but with greater volatility due to their sensitivity to the dollar and capital flows.
In commodities, the picture was supportive, as steady demand, combined with supply constraints and geopolitical tensions, bolstered prices, with energy standing out and industrial metals benefiting from improved expectations for global growth.
Overall, May was characterized by a balance between tight financial conditions and resilient growth, maintaining positive momentum but with increased sensitivity to macroeconomic developments.
The positive momentum in international capital markets had a positive impact on the agricultural commodities index, with the majority of individual products posting positive returns. An exception was the price of orange juice, which declined due to a normalization of supply following previous downward pressures on production.
The balance of risks in the agricultural sector is likely to remain tilted toward the upside, influenced by the recent outcomes of the Trump–Xi meeting, as well as developments in medium-term global supply and demand balances for grains.
One significant development was China’s commitment to purchase approximately $17 billion annually in U.S. agricultural products during the 2026–2028 period, including approximately 25 million metric tons of soybeans.
Meanwhile, the El Niño phenomenon is likely to occur soon (82% probability, for the period May–July 2026) and continue through the winter (96% probability, for the period December 2026–February 2027).
The wheat market remains supported by tight supplies and increased weather volatility. Corn maintains strong momentum, as estimates indicate limited availability in the U.S. due to strong demand, while global stocks have also been revised downward.
The outlook for soybeans remains relatively balanced, despite ongoing import commitments from China, although uncertainties surrounding financing may affect the pace at which positive estimates for the upcoming harvest are realized. Sugar is likely to see strong upward momentum, as the market increasingly focuses on the gradual tightening of supply-demand balances for the 2026–2027 period.
For cattle, prices are expected to continue their upward trajectory, as recent data indicate that the U.S. cattle herd has fallen to multi-decade lows. Rice is expected to trade in a mildly tight market, supporting a moderate upward trend. However, favorable weather conditions are expected to boost production, mitigating any upward pressure.
The agricultural products index recorded a significant increase of 2.78% in May, although the commodities index moved to higher levels (+5.11%). This development reflects the divergent dynamics among the individual categories. The performance of the commodities index is mainly attributed to the significant contribution of energy, which remained in the spotlight due to geopolitical developments.
In contrast, the more subdued performance of the agricultural products index is attributed to the fact that their prices are primarily influenced by fundamental factors, such as supply and demand conditions, seasonality, and weather fluctuations, reflecting a lower dependence on the broader investment climate. Nevertheless, risks remain from persistent inflationary pressures and uncertainty regarding the momentum of the global economy.