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Some mornings, the task of writing about the goings on in the market feel akin to being a writer for some type of celebrity publication. So and so, walked their child to school wearing white tennis shoes and carrying a black purse. Or maybe supermodel (insert your favorite) was seen with dark glasses. Was she/he hiding something? It is just so much minutia, and while there could at times be an underlying or developing story, most of the time it is just noise. This morning we have grain and soy markets advancing, and for the third day in a row for corn but, there would appear to be little fresh in the news to account for this and realistically, we just remain within the same price parameters that we have now for the past several months and actually several years.
One less than encouraging story was published by Reuters overnight. The US/China trade spat shows no sign of improvement, and in fact, since China slapped import duties on U.S. sorghum, several vessels headed that direction had to be diverted to other destinations, and Chinese buying of US beans has also ground to a halt. They have not purchased old crop beans from us for two weeks now. Granted, this is the time of year when they generally shift the majority of the purchases to South America but not to that extreme. As I noted yesterday, in the month of March, Chinese imports for beans from Brazil were up 33% while those from the US were down 27% but even then, we shipped more quantity than did Brazil; 3.1 MMT vs. 2.3 MMT. One buyer at a Chinese crusher was quoted in the article as saying, “We are now buying Brazilian, Canadian and some Argentina beans” and “We are a state-owned company, we wouldn’t dare buy U.S. beans.” It was also reported that last week, China purchased more than 40 cargoes of beans from Brazil, compared with a 20 to 30 in a typical week. Needless to say, this is not the type of news that is welcome as our stocks have potential to grow to record levels and worse, provide the Chinese incentive to invest in other regions around to world to secure their long-term needs. On a more hopeful note, Treasury Secretary Steve Mnuchin is headed for China next week to address the trade spat.
While certainly not a household name, The Baltic Exchange in London has been around for 274 years and is the go-to place for indexes for global shipping rates. We have always looked to the Baltic Dry Index for possible clues for shifts in demand and while that is not exact as the vessels counts, etc., always play a role, but it has traditionally been a useful indicator for increases or decreases in world demand. It would appear now that the exchange is “upgrading” to reflect modern shipping demands and is introducing global freight contracts and indexes specific to grains, gas, containers, and possibly air freight. I understand the major grain houses, both U.S. domestic and foreign, were consulted in the development. The reason that is so critical as no matter how good a contract sounds, if the commercial end of the business does not embrace it, it will never survive. The fertilizer futures contracts are a perfect example. Hopefully, these new instruments do survive as I have to believe will be one more element we can place in the analytic arsenal. The Baltic Exchange was purchased by the Singapore (SGX) in 2016.
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