Stone X Update
- Last Thursday our originations team attended StoneX’s Spring 2024 Outlook Meeting in Toledo, Ohio. This meeting featured several guest speakers from StoneX’s Market Intelligence team. Arlan Suderman gave a Global Grain & Macro Update. Below are some key notes from his very informative presentation.
- This year’s weather pattern is looking like it will be a repeat of 2020. They’re predicting warm and wet climates
- Comparing the US drought monitor map from January to now, it is evident there is plenty of subsoil moisture in majority of the states
- The US grain market trades Black Sea fundamental stories more than their own due to the control the Black Sea has over the global wheat prices
- In 2010 there was a drought in Russia that resulted in the wheat prices doubling
- The big question is… if and when will Russia stop exporting wheat and how big of reaction the market will have
- India’s Rice supplies affect their wheat imports. To India the two crops are interchangeable. If they have high yields in their rice crop, they can rely more heavily on it and don’t have to worry about importing lots of wheat
- With the ongoing tension between China and Taiwan there is potential for soybean futures to see a reduction if China invades Taiwan. With the invasion it is possible the US will place trade restrictions on China. The trade restrictions will hurt the US grain prices as China is the number importer of US soybeans
- Current supply and demand do not rationalize high demand and higher prices
- Inflation expectations have a big effect on fund positions in the commodities markets. Lately funds have taken a short position due to inflation rates dropping. But as inflation levels out, we are seeing them buy back their short positions and get closer to even.
- If central banks decrease interest rates, and if government spending continues at high rates. Funds will expect that to lead to inflation and start getting long commodities. Usually, this activity is a leading indicator of inflation, so that by the time we see CPI numbers, commodity and asset prices would already have risen.