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The Hueber Report is a grain marketing advisory service and brokerage firm that places the highest importance on risk management and profitable farming.
I can only assume that my personal invitation to the annual Financial Times Commodities Global Summit must have been either lost in the mail or possibly, as so often happens, someone may have spelled Hueber incorrectly (doesn’t everyone know it should be Hueb and not Hub), which may have delayed the delivery but regardless, the event does kick off today and I will not be in attendance. Who wants to travel to Lausanne, Switzerland at this time of the year anyway? All those old buildings, castles and stunning views of Lake Geneva. We will just have to rely on second hand reports from the event but it will be interesting to hear what the leaders of the major commodity producing/trading firms and nations will have to say this year. Twelve months ago at this event the general attitude seemed to be one of cautious optimism that the worst of the downturn was behind us but of course a sluggish world economy, sub-$30 crude oil and a stubbornly strong dollar threw a bit of a monkey-wrench into what ever wheels may have been turning at that time. As we know, there has been massive restructuring within many of the giants in the commodity industry over the past 12 months but the question now remains as to if that has been enough to adapt to the new realties of the industry.
I suspect top on the minds of many attending the event will be the plight of so many developing or under developed nations that were beginning to see their economies start to bud and even blossom but are now struggling with heavy debt loads and prices significantly lower. The World Bank reported over the weekend that demand for loans from ailing commodity export nations has reached back to the highest levels since the 2008 crisis but this time around, the loans are not for investments or expansion but rather just to try and survive. Actually, the World Bank is holding it’s spring meeting in Washington this week and it is widely expected that they will be downgrading their projections for global growth this year. Note that for many developing counties that are dependent on commodity production, the economic hit has been two fold as lower prices have meant less revenue but also often times their debts are based in U.S. Dollars which means it is more expensive to service. It is estimated that in low to low-middle income countries, on average it now requites 10.8% of government revenue to service debt while just three years ago that was 6.1%.
While all of this may seem distant from spring planting here in the U.S. and the prospect for the price recovery, but do not delude yourself into thinking that is really the case. I continue to maintain that one of the key longer term factors that will restore profitability to U.S. agriculture will be rising income levels in the many developing nations around the globe. Historical demographics has shown us time and again that as more and more people climb into middle class status ($10 day) they become greater consumers in general but specifically in their diets and begin including more and and more animal proteins and simply, more meat consumption means more grain demand.
Not a tremendous amount of price influencing news around this morning. We will see weekly planting updates this afternoon and the monthly supply/demand reports tomorrow but there should be nothing “shocking” within either. The wheat market is evidently disappointed in the amount of potential damage from cold weather last week and with warming temperature and clearing skies now in the forecast there is not much in the immediate outlook for stimulus.
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