David Fuller and Eoin Treacy's Comment of the Day
Category - General

    Food Inflation Rears Its Head in Chile and Brazil in November

    This article by Mario Sergio Lima and John Quigley for Bloomberg may be of interest to subscribers. Here is a section:

    In Brazil, the inflation pick-up comes as economists and company executives sound the alarm on rising meat prices due to dwindling supply. China, the world’s top meat consumer, doubled pork imports and shipped in 63% more beef in October than a year earlier as the country struggles to ease shortages due to African swine fever.

    “The food price shock has arrived” in Brazil, said Leonardo Costa, an economist at Rosenberg Associados. “We’re increasing our 2019 inflation call to 4% because the increase in food and
    beverage costs will be even stronger in December.”
     

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    Japan Leans on Fiscal Stimulus to Keep Recession at Bay

    This article by Toru Fujioka, Yoshiaki Nohara and Takashi Hirokawa for Bloomberg may be of interest to subscribers. Here is a section:

    “In any country, the positive impact of extra monetary stimulus is limited, which is especially true in Japan and Europe where rates have turned negative. You have no effective choice but to execute fiscal measures to support growth,” said Harumi Taguchi, Tokyo-based principal economist at IHS Markit.

    Earlier in the day, Abe described the stimulus as a three-pillared package designed to aid disaster relief, protect against downside economic risks and prepare the country for longer-term growth after the 2020 Tokyo Olympics.

    He said the stimulus would be funded by a supplementary budget for the current fiscal year ending in March, and special measures in the following year. The package outlines 4.3 trillion yen in funding for the measures in an extra budget this fiscal year.

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    DoubleLine Joins IMF in Fretting About Dollar Loans Outside U.S.

    This article by Vivien Lou Chen for Bloomberg may be of interest to subscribers. Here is a section:

    The cost of dollar funding for non-American banks can change rapidly because it’s sensitive to monetary conditions in the U.S. and abroad. September’s repo turmoil showed the speed with which a spillover could occur between dollar funding and currency markets. Within a day of the sudden surge in the overnight rate on Treasury repurchase agreements that began Sept. 16, the cost to borrow greenbacks while lending euros for a week almost doubled.

    For DoubleLine’s Campbell, “the analysis of currency mismatches and asset/liability funding mismatches is an integral part of our investment process as we evaluate these risks on a country-by-country and security-by-security basis.”

    At issue is what might happen when foreign banks get caught in a liquidity squeeze, and their sources of dollar funding dry up quickly, he added.

    “When we go through the next downturn, a lot of activities are going to be exposed as being problematic,” he said. “The risk is that it could contribute to an even bigger fall in economic activity.”

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    Email of the day from a coffee insider

    The estimate of the Brazilian coffee crop of 2019 is 49 million bags of 60 kg This means a 20 % drop from 2018, when Brazil produced a record crop of 62 million bags. This is a big difference. But it is due to the fact, first that Brazil is in the “off-year” of its two-year coffee production cycle, which alternates between years of high and low production cycles. The coffee trees are resting one in two years. Second, there has been irregular weather that was not good for the crop. And third, the farmers are diminishing the crop care because of prices that have fallen too low. This is happening after a bumper “on-year” which brought a collapse of prices. The influence of Brazil on the world coffee market is important because it is the largest producer. (62 million bags on a total world production of 175 million bags). But in the other countries the same causes have most of the time had the same effect.

    What must be noticed also is that very low prices because of overproduction were normal to a certain extent, but as always, investment funds and speculators (or call these also investors with a euphemism) went about 51.000 contracts short (equals 12.750.000 bags) and then suddenly reduced these short positions to about 17.000. This of course amplifies the movements of the market, this time to higher but still not normal prices. In the meantime, the farmers are starving with a daily income of 3 dollars, flee their central American countries and try to get in the U.S. It’s a shame, a hard world. That’s why in my company we promote Fair Trade Coffee, now at about the double of the price of the market. We are making nearly half of our turnover with this coffee.

    The Real is also an important parameter, but it is not the only one. The two charts of coffee and Real are often linked, but not always when such fundamental events are happening;

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    China Uses DNA to Map Faces, With Help From the West

    This article from the New York Times may be of interest to subscribers. Here is a section:

    The technology, which is also being developed in the United States and elsewhere, is in the early stages of development and can produce rough pictures good enough only to narrow a manhunt or perhaps eliminate suspects. But given the crackdown in Xinjiang, experts on ethics in science worry that China is building a tool that could be used to justify and intensify racial profiling and other state discrimination against Uighurs.

    In the long term, experts say, it may even be possible for the Communist government to feed images produced from a DNA sample into the mass surveillance and facial recognition systems that it is building, tightening its grip on society by improving its ability to track dissidents and protesters as well as criminals.

    Some of this research is taking place in labs run by China’s Ministry of Public Security, and at least two Chinese scientists working with the ministry on the technology have received funding from respected institutions in Europe. International scientific journals have published their findings without examining the origin of the DNA used in the studies or vetting the ethical questions raised by collecting such samples in Xinjiang.

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