The menu of the day offers you Salad of agricultural risks

In the markets of many ‘commodities’, volatility is accompanied by a lack of liquidity and a sudden movement in the volume traded directs the price, exposing tangential angles that divert us from the differential between cost and value.

To this is logically added the complexity, the evils of the bureaucrats who dictate partial policies that end up hindering trade. We have administrations that decide when an existing inventory becomes available, affects supply and demand and an industrialist is left before the interpretation of the authorities that end up manipulating world trade.

We face a menu with an uncertain economic environment with inflationary pressures, the foregoing logically undermines spending capacity, with an increase in prices that marginalizes the consumer. The demand remains in the air, and if in this the supply decreases due to the drop in production in the northern hemisphere, we find that the low productivity matches the drop in consumption.

Another issue on the table is the war in the Black Sea, Russia begins to dictate winter behavior and will surely restrict and condition the energy supply to Europe, which depends on the climate to deliver an acute need for energy if the winter is intense, or going out in the spring not so rough if the winter is mild, the supply situation in the black sea is an exemplary way of showing you the difference between an existing inventory relative to an available one, what better example. Ukraine has produce that cannot go freely, and Russia has grain that the world cannot easily buy for obvious reasons. The starters menu ends for now with the climatic theme.

At the moment a complicated drought in the United States that has dried up the flow of the Mississippi River, the pluvial route without a clear capacity for barge transportation limits the flow of merchandise to the export centers and that leaves the North American export programs in a very bad position. The weather is also being critical in South America where for the moment we are risking the effect of a third year as a girl, something that if it continued would be devastating for the production of Argentina mainly. The climatic issue in Brazil is not yet so dramatic and without a doubt Brazil will be the change of order that the world needs once it is currently heading to present the world with a barrage of soybeans and corn, if, and only if, the climate cooperates . The above is left to your discretion.

Finally the Chinese politburo is renewed. History marks Mr. Xi Jinping as the leader for another five years. The change in the Chinese cabinet is interesting, elements that played technical are changed by others that play rough. The old guard of hardness returns to the leadership on the other side of the great wall and with it nationalism will be a banner in which they will wrap themselves to defend the rights of Taiwan and Hong Kong. China and the US will be in the global spotlight over the Black Sea.

The problems of the present are the issues of the future that we did not know how to resolve. Don’t think about prices, think about margins. Focus on what you can influence.

You’re in good hands?

aochoa@rjobrien.com