RealAg LIVE! with Brett Stuart on what makes a commodity super-cycle
A current issue on a lot of people’s minds are the commodity markets, and unbelievable old crop and futures canola prices are sure a surprise for many. But what exactly is a commodity super-cycle, what’s behind it, and how long will it last?
For this RealAg LIVE! session, Shaun Haney chats with Brett Stuart of Global AgriTrends on you guessed it: global agri-trends!
RealAg LIVE! streams every weekday at 3 pm E on Youtube, Facebook, and Twitter!
- What IS a commodity super-cycle?
- It’s somewhat of a perfect storm — happens when multiple factors happen at once
- Far beyond supply and demand, booming customers, money and inflation, and interest rates…
- Are commodity runs different than the equity side? There’s a lot more to commodity markets than equity markets in some ways
- Commodities became a “cheap” buy
- Is China the biggest factor?
- You need oxygen, fuel, and a spark — China has been that spark, led by African swine fever
- 2019 we lost 1/4 of the swine herd
- And then China found out they were out of grain, and we were off to the races
- Ending stocks are a state secret in China, you don’t ask about them
- AFS is hard to kill, spreads like fire, food waste is fed to pigs — and likely re-infecting the hog herd. This is 2019, they banned “swill feeding”
- They begin rebuilding the herd, prices are great for hogs, and then they have to feed them something so…
- 85 per cent of the herd was small, now they’re commercial scale and using commercial feed
- 30 million tonnes was food waste….that had to be replaced. That’s 1.2 billion bushels of corn!
- 6 million acres of U.S. corn!
- He thinks it even caught China off-guard and that’s why they had to step in and buy high
- There was a huge amount of flooding in a rice and hog zone in 2019
- The signal is grow more! It’s a year over year “fix” for high prices
- In livestock markets (cattle) it’s a 3-year cycle
- It will come down, but there’s a major shift outside of the actual market, i.e. the stock market.
- Money supply — we just grew the supply 26 per cent. Inflation!
- How long will it last? Look longer down the calendar….
- Soybean shortage?
- Should we be worried about further antagonizing the Chinese government further?
- The country drives the corn and protein markets right now
- Can we wean ourselves off China? Reduce the risk of the dependence?
- Ag reform in India impact on global markets? Probably not. India is too closed off. Not a huge importer or exporter of anything. And that’s too bad. Because their people could benefit from the import of food.
- There’s fear that those farmers are put out of work and then what will they do?
- China will only import so much pork; they don’t like to position themselves to be dependent on only one source
- Land, acres, water — China can’t be self-sufficient on food
- Inflation is here to stay. And only one good solution — and that’s to raise interest rates, and that’s scary for the economy
- Veg oil complex? Still in the sugar rush