Marketing your milk, livestock or grains is hard. Sometimes it doesn’t seem fair that we have to monitor so many potential price aspects and market movers on a daily basis. Fifteen years ago, the only thing that mattered to corn or soybean prices in the U.S. was if there was decent crop within our own borders. Now, not only does that matter, but we have to monitor crop conditions worldwide. We are meteorologists, constantly scanning weather conditions in Brazil, Argentina, China, Australia, Canada, the European Union, the Black Sea Region and Russia. One good rain or one span of drought may make the market move 15 to 50 cents in either direction. In addition to global weather, we also monitor global economic conditions because that equates to demand of raw commodities as different nations around the world import our meat and grains. Throw in a meat scandal, a temper tantrum from one of the world’s leaders, an earthquake which triggers a tsunami or a threat of a supply disruption of oil in the Middle East and from nowhere, the market races higher or crashes lower in seconds. Soon you’re left standing behind wondering what to do next.
Welcome to my world. Good thing I happen to like weather, politics and agriculture. Daily, we as market advisors must prepare for whatever the market may toss us and enact market scenario planning. It’s not for the faint of heart. However, the more we prepare for anything, the easier it is to take the emotion out of the marketplace and put the plan into action. Now, that being said, we wanted to bring you up to speed on a few global happenings that may or may not be upcoming market movers in the weeks and months ahead.
Meat Safety in China – Seems ongoing; from infant formula to dead hogs being dumped into rivers to expired meat being served in restaurants. Supply and demand can be interrupted in a heartbeat, and it’s important to be ready for a move higher or lower at any time. The most recent scandal in China involved workers at one of McDonald's longtime suppliers, OSI Group, repacking expired meat. McDonald's had to respond quickly and has stopped using supplies from the plant in Shanghai leaving many of its restaurants unable to serve Big Macs, Chicken McNuggets and other items. Will this now make the Chinese consumer not demand beef or chicken? Will they switch to a different protein source instead? Or will the great taste of a hamburger draw them back in a few weeks once fresh meat is stocked?
Testosterone in Russia – The showdown continues with Russian President Putin puffing out his chest and responding recently to economic sanctions imposed upon Russia by retaliating financially in the form of banning most food imports from the West. Baffled, many global leaders didn’t think he’d do such a thing. This may cost farmers in North America, Europe and Australia billions of dollars. However, it will also likely lead to empty shelves in Russian cities as Russia depends heavily on imported food, most of it from the West. Food and agricultural imports from the U.S. to Russia amounted to $1.3 billion last year, according to the U.S. Department of Agriculture, and in 2013 the EU's agricultural exports to Russia totaled 11.8 billion Euros ($15.8 billion).