Commodities, economics, and global trends — a LIVE! Q&A with StoneX Group's Arlan Suderman

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In this Wednesday edition of RealAg LIVE!, host Shaun Haney is joined by Arlan Suderman, chief commodities economist at StoneX. Shaun and Arlan talk trade relationships and patterns, the impacts of weather and disease, new frontiers in agriculture, and so much more (read more below the video player).

Don’t miss RealAg LIVE! each Tuesday to Thursday at 3 pm Eastern across social media!

  • StoneX helps customers manage risk exposure, which looks different in different parts of the world
    • in Canada, clients are more farmer-based, while in the U.S. they’re more commercial-based
    • it’s about working with customers to understands their needs in managing risk exposure
    • fundamental analysis of what the upsides and downsides of markets are
  • In some ways, China is the ideal customer — but it’s been difficult to do business with them
    • China wants to be both number one economically and in the military
    • they don’t want to be dependent on any one company, but would rather make you dependent on them
  • It seems like the worse the relationship gets, the more product they’re buying
  • Phase 1 is a result of some small capital control measures
    • they need to maintain the appearance of keeping the Phase 1 agreement while Trump is in office
  • Phase 2 negotiations could have started right away if it hadn’t been for coronavirus
  • Flooding in China has been getting more attention in the mainstream — how could that affect the rest of 2020?
    • some reports aren’t true, but the floods are definitely serious
    • most of the floods are in central China, which is a large concentration of rice and rapeseed
    • there is a large amount of rice in reserve, but the situation could affect next year’s rice production
    • the bigger adverse affect on corn & soybean is dryness in the north China plains
    • the Three Gorges Dam is a serious issue to watch, but isn’t affecting crop production right now, as reported
      • if the dam breaks, it could affect rebuilding pork production to some extent
      • huge economic impact on the whole
    • this is the greatest challenge the Communist Party has faced since coming into power
  • What’s happening in China with ASF and the hog herd?
    • it looks like they’re 20 – 30% below where they were, pre-ASF
    • piglet prices set a new record this week
    • commercializing operations and squeezing out small farmers
    • ASF is still very active, but the only reports you hear are of hogs in transport because local governments have to subsidize positive results
  • Spring wheat: there will always be demand for it, but unfortunately the demand isn’t high enough to pay the bills
    • Russia put in the investment in genetics and infrastructure, and are now surpassing production in North America
    • we can’t rest on our laurels when it comes to infrastructure, because Brazil and the Black Sea region are coming for us
  • How has COVID-19 impacted strategies as farmers try to make the best trade decisions?
    • it’s hit the livestock industry the hardest
    • on the grain side, it’s been a different challenge but coronavirus has worked to our advantage to some extent
      • China has been front-loading their Brazil purchases, because they believe that production and trade will shut down here as it did for them
      • the result may be that we get closer to the Year 1 numbers for Phase 1, but Year 2 numbers are still uncertain
  • We’re producing too much oilseed in the western hemisphere for demand right now
    • they’ve reopened the doors now, but not to where they were
  • Are there going to be new areas producing in the future, or are we stopping with the Black Sea?
    • Brazil is a wide-open space of opportunity
    • it’s the equivalent of the Grain Plains in the U.S. from the Canadian border down to Texas
    • the biggest thing holding them back right now is the lack of infrastructure; but they’re starting to make the investment
  • What can we do to counter the new acres coming online in places like Brazil?
    • Brazil isn’t just looking at crop prices, but are also looking at currency exchange rates
  • How do we prioritize infrastructure investment to stay competitive?
    • we have to be part of the grower associations to lobby lawmakers
  • In the next 5 – 10 years, what are the next major opportunities?
    • we have to find other alternatives for ethanol and diversify
    • the livestock sector needs to wake up on fake meat — we have something to be proud of, but we can’t be silent about it
  • Will China ever implement a mandated ethanol blend?
    • it’s off the table, because they could never built up the infrastructure to do it
    • the mandate is gone — if we had it, we’d have a huge market
  • What is the future of the RFS?
    • it’s going to struggle longer term; we’re not seeing the political support for it
    • there’s the perception that putting corn into ethanol will take it out of food — which isn’t accurate, but perceptions colour reality
  • What about beef demand?
    • looking at drops in food service, because of coronavirus — there’s a fine line bordering on oversupply with the uptick in grocery sales
    • a lot of the barrier comes from China being paranoid of the virus that originated from their own country

This LIVE! segment was brought to you by StoneX. For more information about StoneX or anything that was discussed in today’s episode, contact the StoneX team in Western Canada:

Jason Labossiere
Senior Risk Management Consultant
204-720-0569
[email protected]

Meaghan Bell
Senior Cash Broker & Risk Management Associate
437-229-8963
[email protected]

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