Good morning Good afternoon Good night. It is said that honor reaches as far as the balance of the checkbook is exhausted, and in that sense, the Americans are close to showing the copper. The political fight of the last few years has been incredibly divisive and today, once again, you reach that area where you spend more and technically there is no permission to continue doing so, only obligation.
The White House administration has obligations that if not accommodated could lead to default. As you know, the world revolves around the dollar, it is the reserve currency and it is difficult for this to be reversed in the short term. The gesture of the famous BRICS is tender and praiseworthy, but it is far from being an immediate solution. Perhaps it will be possible to seek to settle some commercial deals between the parties, but it will be difficult for the aforementioned countries to completely get out of the dollar.
I don’t know if the world is ready to operate currencies that yield at the whim of capital control as happens in China, or in the darkness of Russian tyranny, or the economic volatility of Brazil, or the European currency unit lacking fiscal unity. The reality is that there is no market that offers more liquidity than that of US treasuries and there is no short-term facility to uncouple more than 12 trillion dollars of corporate debt on the planet. The dollars are needed and perhaps the world will try to stop the transit a bit, but it will be difficult to suddenly replace it without a tectonic change that would be very painful for the world.
Let’s say that the above is clarified before it is questioned, because although in the United States there is enormous potential to see ruptures in large banks, collapse in commercial real estate, insolvency of insurers and a recession sequence that could worsen if it is not stopped soon rate hike medicine.
Things can be contained if the task is done right. This usually happens, but this time there are no guarantees. The Federal Reserve for the moment left open the possibility of perhaps stopping the increase and waiting to see what happens from the present height, perhaps we will see one more rise before entering said pause, especially given the reality of low unemployment and a resilient labor market.
It will be necessary to follow the novel closely, because this gives strength to the dollar, or takes it away, and that has a link to the price of many commodities. For them we will only say that, from the agricultural point of view, the sentiment is negative, or bearish. It is difficult to be a buyer of raw materials when the financial authority tries everything in its power to avoid price rises, we could say that, although inflation is no longer the cause of greatest concern, we are entering the zone of credit conditions in deterioration.
That is not an incentive to invest from speculation in commodities either. So it is not that the “managed money” speculators have a short wheat position that is almost record in relation to the open interest of the Chicago contract. Grain markets at the moment feel that buying is catching a falling knife, but that bearish sentiment is perhaps the biggest bullish force we have.
Imagine that the issue in the Black Sea gets stuck and bulk carriers are not allowed to transit from Ukraine via the Bosphorus, or perhaps the reins change and the presidency in Turkey changes hands in the elections, making the dialogue with Putin less direct and trade negotiations in the area are hindered.
There are many pretexts, I just want to highlight that, if something changes the bearish sentiment of speculators, a neutralization rally can be triggered, that is, the sold positions are bought in a hurry, causing an increase in prices that perhaps has nothing to do with it. with fundamentals, only with the effect of neutralizing risks.
Our markets basically show evidence of increasing supply, and decreased demand. Let’s say that in this narrative we must add the completion of the South American campaign that will start at the end of the summer. Brazil will have a world of corn for the world that we do not know if it is needed. The excess production in Brazil has been enormous, but they themselves did not expect such generosity and that has meant that they have more than they had contemplated selling, and without much capacity to store it, so a lot of inventory will have to be made available, taking away the role of the North American agricultural cycle and the lack of production due to drought in Argentina.
Mexico in a complicated avenue, the field has to commercialize more than what the market can absorb and at a price that the market cannot pay. The public administration will have to remember what was offered to the countryside during campaign times, and see the producers in the face as well as the users of these products who are on the mission of efficiently feeding the country, but they are not on a mission to do it by losing money.
In this case it is said that the taking of coverages is inversely proportional to the taking of roads. Mexico must have better policies for the productive field and less rhetoric for the electorally captive field. You’re in good hands?
