Analysis Grain market: opportunities present in the global confusion

Good morning, the calendar is advancing and this 2022 continues without giving us a break as we navigate the cataract of news and variables that appear week after week exerting opposing forces on grain prices.?We go through a real roller coaster, particularly in the international arena, because in our country there are not too many surprises, everything is as predictable as in the morgue.?For the first thing is that we will say more than ever, and with absolute certainty: “…No one on the planet in their right mind, much less who writes, can dare to define, seriously, where the prices of our products will go or when the end of the reigning delirium…”.?So, once again, but more than ever, we suggest?analyzing variables, fine-tuning economic budgets, fund flows and making decisionswithout hesitation when purchase, sales or price hedging opportunities appear, for the benefit of our agricultural companies.?It is worth saying that these opportunities are now within reach.

SUMMING UP WHAT IS IMPORTANT ABOUT THE SITUATION.

The Bulls…

-Stock/Demand Relations in the United States- Although it is true that we navigate in the fog that puts us in front of us in a delirious global environment, we must not forget that the Stock/Demand Relations in the United States remain extremely tight.?It is worth remembering that when these indicators are below 10%, they constitute a “Fairness” alert.?And so we are in available North American corn and soybeans, as we head into the 2022 planting year, which shows a premature advance of 4.00% in corn and 1.00% in Soybeans, with some moisture shortages in the Center and Northern Iowa and, Northern Illinois that we need to keep a close eye on.?Going to the point, at the moment and according to the April USDA report, the numbers show stock/demand ratios of 9.64% and 5.85% for Corn and Soybeans, respectively.

-Indonesia once again closes palm oil exports– Towards the end of 2021, Indonesia, the main exporter of palm oil, decided to close its exports in order to control the domestic prices of this product;?reaching from this the historical record price of Palm Oil and Soybean Oil accompanying the direction of variation of its price.?On March 18, he decided to reopen them, arguing that the remedy had been worse than the disease;?but it established “Variable Export Rights”.?Finally, on April 22, explaining that the war in the Black Sea drastically reduced the supply of vegetable oils, he again closed Palm Oil exports in order to ensure local availability.?Remember that this, which seems so far away at first sight,?is extremely relevant for Argentina because Soybean Oil is the immediate substitute for that oil and our country is by far the first exporter, with almost 50.00% of its global trade.?In other words, the price of soybean oil is highly positively correlated with the price of palm oil.?And the prices of both oils reacted accordingly, that of Palma resumed the increases and that of Soybean reached its historical record of U$D 1,818/tn last Friday.

-Ukraine - Delays in planting and bombings in the port of Odessa– First of all, we must remember the enormous participation of Ukraine in the global trade of Sunflower Oil and Corn grain with 50.00% and 16.00%, respectively.?Understanding this, we must bear in mind that we are going through the planting window for these crops in that country, in the midst of the war and with a good part of the productive regions particularly compromised, such as the oblasts (provinces) of Kherson, Zaporizhia, Donetsk and Lugansk, which constitute the land corridor, crossing the Ukrainian coastal territory of the Sea of Azov, opened by the Russian army from Crimea to the northeast and towards the border with Russia.?Precisely this territory adds up to 19.00% of the total area of Sunflower in which clearly the conditions are not the best to advance with the sowings.

Something similar happens in the Center - North of Ukraine, bordering with Belarus, where the oblasts with the greatest participation in the corn planting area are found.?Finally, let us remember that the planting window for these crops in that country is between the months of April and May, and at the moment there are already serious delays.?A question that will be revealed soon, but large decreases in surface and production would have a significant upward impact on the respective prices.?On the other hand, news is beginning to arrive from those Black Sea neighborhoods about the bombing of Odessa port facilities, which had not happened until now and is something very important for the flow of exports from Ukraine to the world and not only of Grains and derivatives.

The Bassists…

-China – COVID-19 lockdowns.?Since April 1, the huge city of Shanghai has been in strict confinement, with more than 25 million people confined.?To date, there are more than 45 Chinese cities that suffer from this condition and this is beginning to show its effects with overcrowding in ports and enormous delays in loading and unloading.?The Chinese government has taken the lockdown issue very seriously this time and it is beginning to have serious consequences.?The most relevant is the reduction in GDP growth expectations this year and what we observed at the end of last week with great astonishment, a phenomenal devaluation of the yuan, of 2.70% in just 7 days.?The dollar in that country went from 6.37 to 6.54 yuan, showing a rare exchange violence in the price of the Chinese currency and as you know,

-FED – Accelerate its contractionary monetary policy– It is known that Jerome Powell, president of the Central Bank of the United States, is already putting all the meat on the grill in order to meet his new objective, “lower inflation” in his country, which reached 8.50% per year, a true nonsense for the largest economy on the planet.?This is raising interest rates and eliminating the issuance of money, now that the first objective set in April 2020, which was to reduce unemployment to pre-pandemic levels, has been achieved.?What was new was that last week it suggested that, as of the monetary policy committee's meeting in early May, it could raise half a percentage point all at once and not 0.25%.?This surprised many in the financial world and on Friday we closed with huge losses in almost every financial asset on the planet.

-Globalized Inflation?– Beyond the Black Sea war, the planet is going through the “Hangover” produced by the colossal monetary issue by the main central banks of the world carried out conscientiously to fight against the economic consequences of the quarantines of the COVID 19 since March 2020. To this effect we must add that when the demands were opened after the quarantines and with a shortage of offers, the prices skyrocketed.?In the instances in which we find ourselves now, of open fight against price spikes, we could see generalized Recessions that would reduce the demands in general and the speculative funds "sell positions until it clears up".

going to management

In the midst of the uncertain scenario described and, as if that were not enough, while we are witnessing the local tragicomedy in which we will not stop today, we simply have to strongly suggest something that we have been doing with countless friends and clients from all over the country who They give us the honor of trusting our commercial and financial advice.?Cover, cover and cover prices, even in spectacular values which, if you don't need pesos, can be done by buying PUTs or selling and buying dollar stock.?There are not a few who at the moment have already “put a bow” on 21-22, covering 100% of their production between PUTs and forward sales…and looking at the stage from the grandstand.

Once again we will say…”the opportunities to connect the dots are there for everyone…take them, it is up to each one”.

Good week!

GRAIN Trader Argentina

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