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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
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).
Global Money and Global Economic Growth – Follow the
money trail. Perceptions that the global economy may slow can put a damper on
commodities. It also can put a damper on investment funds and how they trade
commodities. Thinking forward, the Russia/Ukraine conflict means we may have to
brace ourselves for a stream of weak economic data from Germany and Europe in
August. The direct impact of sanctions and the drop in exports to Russia is far
less important than the climate of uncertainty.
Here’s my recommendation. Stay vigilant. Traditional
supply and demand fundamentals are always important, but be aware of how global
issues can affect the price of corn in your backyard. Apply market scenario planning in your daily
marketing regime, and you’ll be ready for anything.
If you have questions, you can reach Naomi at email@example.com, or
post a marketing question on the Women in Ag Discussion page.
The data contained herein is believed to be drawn from
reliable sources but cannot be guaranteed. Neither the information presented,
nor any opinions expressed constitute a solicitation of the purchase or sale of
any commodity. Those individuals acting on this information are responsible for
their own actions. Commodity trading may not be suitable for all recipients of
this report. Futures trading involves risk of loss and should be
carefully considered before investing. Past performance may not be
indicative of future results. Any reproduction, republication or other use of
the information and thoughts expressed herein, without the express written
permission of Stewart-Peterson Inc., is strictly prohibited. Copyright 2011
Stewart-Peterson Inc. All rights reserved.