What I’ve been reading in May

The Sugar Casino by Jonathan Kingsman (US) (UK): Jonathan takes you through the history of the sugar market, over-rated concerns about obesity, the controversial role of speculators, how companies are implementing sustainability, the way governments interfere in the market etc. The author puts each chapter in context with a story from his own experience being involved in sugar trading and an interview with prominent people involved at different points in the sugar supply chain.

The Elements of Power by David Abraham (US) (UK): Focusing on rare earth metals David delves into what happened in China to drive the price of these metals to stratospheric heights. Lots of good insight in the book about how opaque the markets are, shadowy characters aplenty. A worthwhile read given our dependence on these metals (as well as many other ‘minor’ metals) in things like smartphones and wind turbines.

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Commodities and Africa: A resource curse

There are four main reasons why many African countries have not benefited to the full extent from their natural resources. These are broadly an over reliance on commodities, a distortion of incentives (hollowing out of the manufacturing sector, corruption, conflict etc.), volatility resulting in fiscal policy constraints and low levels of value add.

First, too much reliance on commodities. In three-quarters of African economies, the share of primary commodities in total exports is 50% or more. In one-third of the continent’s economies, that share rises to at least 90%. Concentration doesn’t just exist by sector, but by commodity too. In eight African countries, one single commodity accounts for more than 70% of exports. Many, though, rely on a combination of agriculture, mining and energy.

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History suggests that soybean price rally is not built on stable foundations

Since the start of March soybean prices have rallied by 25% on poor weather in Argentina, putting more than 3 million tonnes of soybeans at risk. Heavy rainfall have damaged the crop while also making it more difficult to harvest. Argentina is the third largest producer of soybeans after China and the US.

However, history suggests that even with a disruption to supply the prospect for further gains are limited.

A cursory look at the relationship between the three main global agricultural crops (wheat, corn and soybeans) suggests that the price of wheat, and to a lesser extent corn is the main driver of substitution affects between crops.

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