DONALD TRUMP is doing to Ag markets what he did to Hilary Clinton — keep them off balance and confused.
And that’s without saying a word.
Ag markets are confused and concerned, mainly by the threat of a trade war.
The USA is sitting on one of its largest stockpiles of grains — just when supply is also growing in Russia, Ukraine and South America.
It was revealed yesterday that the Black Sea wheat has been selling actually for half, already lowering world wheat prices.
This has been because of poor quality, erratic logistics (and concern about storage capacity for next year’s giant crop), and the desperate search for foreign currency by Ukraine and Russia.
No wonder so many Australian farmers are bypassing grains to grow the various beans and lupine in sudden demand in southern Asia. Mungbeans at up to $1,100 a tonne are most attractive.
And then Trump adds to the uncertainty because, if China or the Middle East decide to boycott US grain in trade wars promised by the incoming president, analysts suggest lots of casualties. No wonder the big trading companies are being hesitant about taking-up futures contracts.
And especially if interest rates are increased by the USA Federal Reserve (as was much delayed by the election anyway) and currencies continue to swirl. The Brazilian Real dropped five per cent against the Greenback on Friday — so the price of corn, soybean and coffee were all affected.
Just the show the confusion between the ‘expert’ traders of Ag commodities — look at the strategies by two Brazilian sugar giants (each of which grows, mills and markets about the size if the entire Australian crop).
Cosan is selling as much sugar as it can now and into the future, obviously believing this is the peak of the cycle.
San Martinho is holding back, believing prices will continue to firm, not only because of fundamentals such as Dry Asia, demand outgrowing supply, and China renewing substantial buying, but also because of the Trump confusion on currencies.
Cosan has sold 90 per cent of this year’s crop and 70 per cent of 2017.
San Martinho is holding back a third of this year’s crop expecting sugar to surge.
And no wonder chocolate bars are shrinking and coffee tastes weaker. Those two key commodities added to the Smashed Avocado lifestyle continue to rise.