In a previous life I spent some time as State Manager for the Australian Government owned Australian Wheat Board - which then had a legislated monopoly on the marketing rights for Australia’s export wheat crop. This arrangement was deregulated long ago and I returned to banking before that happened. Back then - and still now - I regularly download the monthly USDA World Food Outlook - the so called WASDE. In the light of a report in the FT outlining the dire situation emerging for food security in many countries right now as a result of the #ukrainerussianwar -the data from the most recent WASDE on 9th March is interesting . In a nutshell - the USDA estimates that in 2022 total traded wheat this year will be 203.1 million tonnes - assuming Russia and Ukraine can export their usual crops due from the spring planning season in a few weeks. USDA estimates that Australia will export 23.85 million tonnes of wheat this year - so 11.74%. This won’t fill the gap left by the absence of Ukraine and Russian grain - which usually supplies between 20 and 30% of globally traded wheat. The pressure will be on the US, Canada and Latin America to fill the gap. They haven’t had a good season so far due to drought across a lot of the Americas - so it’s a difficult time for world grain supply. It’s going to be a volatile food security environment over the next few months for many governments who are net grain importers. With wheat futures enabling some Australian wheat growers to lock in a price of A $ 500 tonne or more right now - according to Malcolm Bartholomaeus - there’s lots of head scratching and discussions with farm advisors and consultants about the plan for the coming Australian winter crop grain planting season which usually starts in late April with the arrival of the winter rains. This is an amazing price compared to recent history. The problem is - as reported by Liv Casben - cropping input costs have also risen - due to the #ukrainerussianwar some fertilisers are now 3 times the price of last year - and diesel is double the price So what to do if you are a farmer? It comes down to a hard nosed assessment of return on costs. Wayne Pluske has some good models to look at in this report from the Australian Farm Weekly. Some farmers I know will stick to their cost budget - and therefore reduce the size of their planting. Others will dramatically cut back on fertiliser application and hope the yield penalty won’t be too harsh. And some may well decide to sit out this year - especially if they don’t have a large farm debt to service. Who’d be a farmer? David L Thomas 22 March 2022 An earlier version was posted on LinkedIn on 21 March 2022:
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I was chatting to the plumber who had come to fix the taps to our outdoor shower last week. It was a quick job - maybe 30 minutes - but in that time he established that I work in finance and banking. He told me he had just invested thousands of Australian dollars into Bitcoin and Ethereum through an app on his mobile phone – and proudly showed me his gains – up 15% since his investment earlier in the week. He wanted to know if he had done the right thing. Put on the spot – I said that if it was money he could afford to lose – no more than 5% of his investable assets – it was probably ok to dabble. But I stressed that it was just pure speculation – gambling really. Taking a punt. He’s not alone. A survey by Finder – summarised by Sebastian Sinclair in CoinDesk in October 2021 - found that Australians were the third highest holders of crypto currencies globally – with 18% of the population owning crypto. Bitcoin was the most popular, followed by Ethereum. And it’s not just the Australian plumbers diving in. The global club of billionaires are increasingly adding cryptocurrency to their portfolios. Scott Carpenter reported in January 2022 that crypto sceptic and billionaire fund manager Thomas Peterffy is now recommending his clients invest 2 to 3 percent of their net wealth in crypto – just in case fiat currency “goes to hell.” Of course, as in all endeavours – there are good and bad actors. In the world of crypto there is evidence of criminal behaviour – some sponsored by state actors. A recent evidence trail points to significant payments in bitcoin from outside the US to activists associated with the January 6 capital riots in Washington last year. Meanwhile, in their fascinating 2022 note lead authored by Gabriel Soderberg - Behind the Scenes of Central Bank Digital Currency – the IMF explores the actions of many central banks considering the use of central bank digital currency (CBDC) – or legal crypto (exchangeable for fiat or as actual fiat currency). The note looks at the case studies in the Bahamas, Canada, China, the Eastern Caribbean Currency Union, Sweden, and Uruguay. The Bahama’s have already issued a retail CBDC – called the Sand Dollar. There are good reasons for central banks to consider a digital currency – including promoting an increase in financial inclusion, improving access to payments by people who don’t have bank accounts, filling gaps in payment needs that are being vacated by commercial banks and reducing risks of financial crime. The study also points to reasons for concern. Concerns include the potential loss of anonymity associated with traditional cash. The Reserve Bank of Australia is well advanced with a trial of its own Central Bank Digital Currency – in partnership with Commonwealth Bank, National Australia Bank, Perpetual and ConsenSys Software. Dharmesh Mistry warns that the commercial banking world needs to get on board with and understand crypto. It could be the tsunami that will blow away their franchise. Especially as Facebook leads the charge by the tech majors into the Metaverse – with parallel worlds of value and massive inbound funds flow as people acquire virtual assets such as NFT artworks and virtual real estate. As we survey the legitimate and speculative crypto universes – here’s two warnings from commentators I respect: Yanis Varoufakis in January 2022 on Facebook’s Metaverse and entering the kingdom of Zuckerberg: “Zuckerberg’s ambition is to insert his billions of Facebook non-gamer users into a Steam-like digital social economy – complete with a top-down platform currency that he controls. How can I resist the parallelism with a digital fiefdom in which Zuckerberg dreams of being the techno-lord?” And Leda Glyptis – musing about the dystopian future of money in a digital world at Sibos 2021: “Because digital currencies are effectively programmable money. And you know what that means? That means it will be possible for the issuer of the programmable currency to make it impossible to spend in certain ways. In certain industries. In certain countries. Gambling. Alcohol. It will be possible to make it impossible for you to pay for a luxury item, or perceived luxury item, a holiday, or a new car before you have paid your child support or your taxes or your rent. It may be impossible for you to spend your money in France or Bolivia. Oh, come on now, I hear you say. Why would anyone do that? Because the vast majority of regimes are illiberal. Because even liberal regimes have short-term goals that need to be met and the means sometimes feel, rightly or wrongly, sanctified by the aims.” So - what’s the so what? How do professionals engage with crypto and digital currency? Two suggestions:
By David L Thomas, 12 March 2022 |
Occasional updates and papers from Chartwell Consulting Pty LtdCharwell Consulting has a wide range of interests and activities across the areas of health, food, energy, water and metal - and the supply chains and investment channels for these sectors. Sometimes we post information we would like to share. Archives
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