Seems the bookies were right. Not for the Cup - they couldn’t have been further away - but for the US Election. Perhaps the only surprise is that it was never close, with Trump winning the electoral college count and the popular count by several million ballots. Now the Republicans have control of the Senate and the House of Representatives, giving the Trump administration a clean sweep and relative freedom to enact change.
It is going to be hard to know what comes next in terms of the market.
The dust seems to have settled quickly, with clarity now required between the rhetoric and actual policy.
One immediate response has been seen in the canola market. Trump has indicated he would ban (or heavily tariff) Chinese-used cooking oil imports. Used cooking oil (UCO) is used as a base material for biodiesel production. The EU27 uses something like 130,000 barrels/day of UCO and the US has been building its consumption to be around 40,000 barrels. While demand was seen to be outstripping supply, it remains a valuable resource to make use of an otherwise waste material. All this being said, Canadian canola futures surged as it is expected that Canadian exports over the border of both seed and canola oil will be the big beneficiaries.
This could be beneficial to us in Australia. With an already large domestic crush program and now the potential for further exports into the US, it could reduce the reach of Canadian canola by reducing their exportable surplus.
The new administration is thought to be rewarding political supporters with key positions in the Government. The one that bears watching is the possible appointment of RFK Jr – the breakaway Democrat – to the role of public health, which includes the USDA. He is known for – among other things – a dislike of ‘corporate farms’, agrochemicals, seed oils and WiFi.
Again, there is a yawning gulf between rhetoric and policy, but anything that reduces US farming efficiency and productivity could have a wider effect on global supplies and trade flows.
After some good weeks on the export front, Chinese demand for US goods will be closely monitored. Trump’s promise to leverage a 60% duty on Chinese imports is unlikely to go unmatched. China’s purchases of US soybeans are already running at multi-year lows and there is a view that there is still unmet demand that needs
to be filled.
The US Fed cut interest rates last night by 25 basis points. This resulted in a rally in the AUD by nearly 1c as our own Reserve indicated that
interest rates might be on hold for some time yet.
Next week
Another USDA report is due out tonight. Early indications suggest less corn and soybeans for next year but similar acres of wheat.
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In this report for LiveCorp and MLA, we analysed the historical trends in the demographics of the Australian sheep flock, examining domestic factors that influence farm-level enterprise decision making.
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Will policy match the rhetoric?
Next week
Another USDA report is due out tonight. Early indications suggest less corn and soybeans for next year but similar acres of wheat.
Have any questions or comments?
Click on graph to expand
Click on graph to expand
Data sources: Reuters, Transport & Environment, USDA, Bloomberg, Mecardo
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Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published
Listen to the podcast
Join the Mecardo team for the Commodity Conversations podcast, where we provide short weekly market recaps and longer conversations with guests to discuss the drivers and trends in livestock, grain and fibre markets.
Research: Analysis of the Australian sheep flock
In this report for LiveCorp and MLA, we analysed the historical trends in the demographics of the Australian sheep flock, examining domestic factors that influence farm-level enterprise decision making.
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We don’t just bring you the most up to date market insights. Find out more about Mecardo’s services including risk management advisory, modelling, benchmarking, research & consultancy.