International
Where Does Today’s Grain Market Volatility Stand Historically?
Today’s high volatility in grain markets still doesn’t match the levels found in 2008, though new tools have emerged to manage risk more efficient…
Share this:
Today’s high volatility in grain markets still doesn’t match the levels found in 2008, though new tools have emerged to manage risk more efficiently.
Corn, wheat, and soybean implied volatility and CVOLTM have been high in recent weeks relative to recent years. Implied volatility for some grains and oilseed contracts was even higher, however, during parts of the commodity boom of the early 21st century. How do the supply and demand fundamentals of 2008 compare to 2022, and what can we learn from the past to inform our expectations for the future?
Present Volatility Driven by Fundamentals
The figure below shows corn, wheat, and soybean CVOL for the past 12 months, with a clear spike in volatility following the February 2022 Russian invasion of Ukraine. Because the Black Sea region produces more than one-quarter of the world’s wheat, uncertainty around supply has led to a significant spike in wheat volatility in recent weeks. Corn, which is also produced in the Black Sea region, has also experienced heightened volatility.
Corn and Wheat Domestic Supply Uncertain
The March 31, 2022, USDA Prospective Plantings report, which reports the intended acreage for principal crops in the United States, serves as the benchmark predictor for the upcoming crop year. This year’s report espoused the intentions of the nation’s farmers to move increasingly from corn to soybeans, with record-high soybean acreage recorded. Many attribute that crop shift to high fertilizer prices. Domestic wheat acreage, which had already been planted at the time of the survey, marked what the USDA stated will be “the fifth-lowest all wheat planted area since records began in 1919.” The department also noted that low intended acreage defied the expectation that high wheat prices would incentivize planting.
Read More About Short-Dated New Crop Options
Spring wheat, which is planted in regions where winters are too harsh for the overwintering process required of winter wheat, is not expected to fill the supply deficit with increased planting in 2022. Low supply increases sensitivity to weather, and cold weather in the Northern Plains and Western Canada is said to be adversely affecting intended acreage among spring wheat farmers. In addition to geopolitical tensions and weather-specific to the present crop year, farmers are experiencing supply chain issues held over from the Covid-19 pandemic, such as high labor costs and low labor supply, as well as hampered logistics.
These factors have resulted in record-high nominal prices. The figure below shows the nearest December Corn futures average settlement prices by week, throughout H1 from 2007 to 2022. In nominal value, December Corn futures saw an average weekly settlement price of $7.417 per bushel in the 17th week of 2022: the highest new-crop weekly average that corn futures had ever reached at that time of year. In inflation-adjusted real value, however, that price was exceeded by both December 2008 and December 2011 Corn Futures, which in the 17th week of the year saw respective average weekly settlement prices of $8.134 and $8.516 in 2022 nominal value.
Volatility and the Commodity Boom of 2007-2009
Volatility for December 2008 corn exceeds December 2022 corn by 5-10% in March of the respective years, and overall at-the-money (ATM) 360-day volatility in 2022 is 25% less than during the 2007-2009 commodity boom. Comparing call skew over the two periods, the 15-delta risk reversal (which takes the difference between a 15-delta call minus a 15-delta put) trades at substantially different levels to puts in the present day vs. 2007-2009. Calls are now trading at an 8%-9% premium vs. 5%-6% during the commodity boom.
BRICs Demand
Like in the present-day, volatility in 2008 was caused by a supply-demand imbalance. But in addition to some supply-side commonalities to the present, 2007-2009 was characterized by a demand-side burst (on top of a global recession that complicated access to credit). The figure below, for example, shows global production vs. usage of soybeans. The crop years 2007/2008 and 2008/2009 exhibit usage exceeding production to the greatest degree since the beginning of record.
Though the period of 2007-2009 is generally associated with the Great Recession and the U.S. subprime mortgage crisis, the ascent and accelerating growth of emerging markets, in particular the BRIC nations of Brazil, Russia, India, and China, shared economic precedence.
The BRIC nations were characterized by large and young populations, vast natural resources, rapid industrialization and urbanization, and what economists determined to be an intermediate stage of economic development. Expectations for the BRIC nations were so high that in 2006, Goldman Sachs released a report titled BRICs and Beyond, in which it projected that in 2050, the top 10 largest economies would include China, the United States, India, Brazil, Mexico, and Russia. Under this prediction, China, India, Brazil, and Russia would see real growth of up to 4,000% during the period 2006-2050. While China, India, and Brazil have largely proved worthy of the economic confidence imparted to them, in growth to date, Russia has been a notable underachiever.
Indicative of the country’s urbanization and increasing wealth, China’s soybean imports skyrocketed in the 2000s, from annual imports totaling only hundreds of thousands of metric tons in the 1990s to 50 million metric tons in the 2009/2010 crop year, to over 90 million metric tons in the most recent crop year.
Such an increase in consumption put pressure on soybean exporting nations, including the United States. The growth in demand, predictably, was a tailwind for soybean pricing.
Other Uncertainties
As BRIC nations increasingly demanded imports to feed their growing populations during the 2007-09 period; weather, trade, and economic dynamics convoluted global trade. A drought in the Southeastern United States complicated the growing season for some U.S.-grown field crops. Meanwhile, the period saw a massive acceleration in the production of corn-based ethanol, fanning the flames of the “food vs. fuel” debate by diverting a significant share of corn from both exports and domestic food and feed use. Echoing present-day issues, fertilizer prices skyrocketed in 2008, driven by increased demand and the slowness of the domestic fertilizer industry to adjust to new fundamentals.
An important difference between then and now is the availability of more sophisticated risk management tools. Times have changed since the commodity boom of the early 20th century, and so have the hedging tools available. Short-Dated New Crop Options, for example, were listed in 2012 and allow participants exposure to longer-dated contracts such as December 2023 Corn or November 2023 Soybeans with shorter time horizons.
This allows participants to gain exposure to lower premiums than conventional long-dated options.
After the Booms
The drivers of the commodity boom of the early 20th century are considerably more ingrained with, for example, a notable deceleration of China’s consumption not beginning until 2015, when investors and supply chain players grappled with slowing Chinese demand.
Early 2022 volatility is largely attributable to supply disruptions stemming from the Russian invasion of Ukraine. The Russian invasion of Ukraine interrupted the factors underlying what many predicted was another commodity supercycle, increasing the sensitivity of agricultural markets to more classically endogenous forces such as weather.
Read more articles like this at OpenMarkets
recession pandemic covid-19 emerging markets recession global trade india brazil mexico canada russia ukraine china
International
What Follows US Hegemony
What Follows US Hegemony
Authored by Vijay Prashad via thetricontiental.org,
On 24 February 2023, the Chinese Foreign Ministry released a…
Share this:
Authored by Vijay Prashad via thetricontiental.org,
On 24 February 2023, the Chinese Foreign Ministry released a twelve-point plan entitled ‘China’s Position on the Political Settlement of the Ukraine Crisis’.
This ‘peace plan’, as it has been called, is anchored in the concept of sovereignty, building upon the well-established principles of the United Nations Charter (1945) and the Ten Principles from the Bandung Conference of African and Asian states held in 1955. The plan was released two days after China’s senior diplomat Wang Yi visited Moscow, where he met with Russia’s President Vladimir Putin.
Russia’s interest in the plan was confirmed by Kremlin spokesperson Dmitry Peskov shortly after the visit: ‘Any attempt to produce a plan that would put the [Ukraine] conflict on a peace track deserves attention. We are considering the plan of our Chinese friends with great attention’.
Ukraine’s President Volodymyr Zelensky welcomed the plan hours after it was made public, saying that he would like to meet China’s President Xi Jinping as soon as possible to discuss a potential peace process. France’s President Emmanuel Macron echoed this sentiment, saying that he would visit Beijing in early April. There are many interesting aspects of this plan, notably a call to end all hostilities near nuclear power plants and a pledge by China to help fund the reconstruction of Ukraine. But perhaps the most interesting feature is that a peace plan did not come from any country in the West, but from Beijing.
When I read ‘China’s Position on the Political Settlement of the Ukraine Crisis’, I was reminded of ‘On the Pulse of Morning’, a poem published by Maya Angelou in 1993, the rubble of the Soviet Union before us, the terrible bombardment of Iraq by the United States still producing aftershocks, the tremors felt in Afghanistan and Bosnia. The title of this newsletter, ‘Birth Again the Dream of Global Peace and Mutual Respect’, sits at the heart of the poem. Angelou wrote alongside the rocks and the trees, those who outlive humans and watch us destroy the world. Two sections of the poem bear repeating:
Each of you, a bordered country,
Delicate and strangely made proud,
Yet thrusting perpetually under siege.
Your armed struggles for profit
Have left collars of waste upon
My shore, currents of debris upon my breast.
Yet today I call you to my riverside,
If you will study war no more. Come,
Clad in peace, and I will sing the songs
The Creator gave to me when I and the
Tree and the rock were one.
Before cynicism was a bloody sear across your
Brow and when you yet knew you still
Knew nothing.
The River sang and sings on.…
History, despite its wrenching pain
Cannot be unlived, but if faced
With courage, need not be lived again.
History cannot be forgotten, but it need not be repeated. That is the message of Angelou’s poem and the message of the study we released last week, Eight Contradictions of the Imperialist ‘Rules-Based Order’.
In October 2022, Cuba’s Centre for International Policy Research (CIPI) held its 7th Conference on Strategic Studies, which studied the shifts taking place in international relations, with an emphasis on the declining power of the Western states and the emergence of a new confidence in the developing world. There is no doubt that the United States and its allies continue to exercise immense power over the world through military force and control over financial systems. But with the economic rise of several developing countries, with China at their head, a qualitative change can be felt on the world stage. An example of this trend is the ongoing dispute amongst the G20 countries, many of which have refused to line up against Moscow despite pressure by the United States and its European allies to firmly condemn Russia for the war in Ukraine. This change in the geopolitical atmosphere requires precise analysis based on the facts.
To that end, our latest dossier, Sovereignty, Dignity, and Regionalism in the New International Order (March 2023), produced in collaboration with CIPI, brings together some of the thinking about the emergence of a new global dispensation that will follow the period of US hegemony.
The text opens with a foreword by CIPI’s director, José R. Cabañas Rodríguez, who makes the point that the world is already at war, namely a war imposed on much of the world (including Cuba) by the United States and its allies through blockades and economic policies such as sanctions that strangle the possibilities for development. As Greece’s former Finance Minister Yanis Varoufakis said, coups these days ‘do not need tanks. They achieve the same result with banks’.
The US is attempting to maintain its position of ‘single master’ through an aggressive military and diplomatic push both in Ukraine and Taiwan, unconcerned about the great destabilisation this has inflicted upon the world. This approach was reflected in US Defence Secretary Lloyd Austin’s admission that ‘We want to see Russia weakened’ and in US House Foreign Affairs Committee Chairman Michael McCaul’s statement that ‘Ukraine today – it’s going to be Taiwan tomorrow’. It is a concern about this destabilisation and the declining fortunes of the West that has led most of the countries in the world to refuse to join efforts to isolate Russia.
As some of the larger developing countries, such as China, Brazil, India, Mexico, Indonesia, and South Africa, pivot away from reliance upon the United States and its Western allies, they have begun to discuss a new architecture for a new world order. What is quite clear is that most of these countries – despite great differences in the political traditions of their respective governments – now recognise that the United States ‘rules-based international order’ is no longer able to exercise the authority it once had. The actual movement of history shows that the world order is moving from one anchored by US hegemony to one that is far more regional in character. US policymakers, as part of their fearmongering, suggest that China wants to take over the world, along the grain of the ‘Thucydides Trap’ argument that when a new aspirant to hegemony appears on the scene, it tends to result in war between the emerging power and existing great power. However, this argument is not based on facts.
Rather than seek to generate additional poles of power – in the mould of the United States – and build a ‘multipolar’ world, developing countries are calling for a world order rooted in the UN Charter as well as strong regional trade and development systems. ‘This new internationalism can only be created – and a period of global Balkanisation avoided’, we write in our latest dossier, ‘by building upon a foundation of mutual respect and strength of regional trade systems, security organisations, and political formations’. Indicators of this new attitude are present in the discussions taking place in the Global South about the war in Ukraine and are reflected in the Chinese plan for peace.
Our dossier analyses at some length this moment of fragility for US power and its ‘rules-based international order’. We trace the revival of multilateralism and regionalism, which are key concepts of the emerging world order. The growth of regionalism is reflected in the creation of a host of vital regional bodies, from the Community of Latin American and Caribbean States (CELAC) to the Shanghai Cooperation Organisation (SCO), alongside increasing regional trade (with the BRICS bloc being a kind of ‘regionalism plus’ for our period). Meanwhile, the emphasis on returning to international institutions for global decision-making, as evidenced by the formation of the Group of Friends in Defence of the UN Charter, for example, illustrates the reinvigorated desire for multilateralism.
The United States remains a powerful country, but it has not come to terms with the immense changes taking place in the world order. It must temper its belief in its ‘manifest destiny’ and recognise that it is nothing more than another country amongst the 193 members states of the United Nations. The great powers – including the United States – will either find ways to accommodate and cooperate for the common good, or they will all collapse together.
At the start of the pandemic, the head of the World Health Organisation, Dr Tedros Adhanom Ghebreyesus, urged the countries of the world to be more collaborative and less confrontational, saying that ‘this is the time for solidarity, not stigma’ and repeating, in the years since, that nations must ‘work together across ideological divides to find common solutions to common problems’.
These wise words must be heeded.
Government
Royal Caribbean Officially Makes Controversial Change
The cruise line has made a controversial change that some passengers will love while others will be angry.
Share this:
The cruise line has made a controversial change that some passengers will love while others will be angry.
During the early days of the cruise industry's comeback from the covid pandemic, Royal Caribbean outlawed smoking in the casino. At the time, the Centers for Disease Control (CDC) required passengers to wear masks in public areas of the ship except when eating or drinking while stationary.
Smoking was, at first, a sort of loophole. People would smoke in the casino and remove their masks (or at least move them to the side) while playing slot machines. That basically meant that unlike drinking, where your mask could be moved and then replaced for a sip, smokers were essentially not wearing a mask.
DON'T MISS: Carnival Cruise Line Comments on a Possible (Very) Adult Change
Royal Caribbean (RCL) - Get Free Report closed that loop by fully outlawing smoking in its casinos while masks were still required. That was something that smokers weren't happy about, but probably understood given how large a role the CDC was playing in setting cruise ship rules.
Once the CDC stopped requiring masks (and regulating cruise ships at all), Royal Caribbean reverted to its pre-pandemic smoking policies. That meant that every casino on its ships had a smoking section. Technically, smoking is only allowed when actually playing a slot machine, but that's hard to enforce and the casinos quickly filled back up with smoke.
Now, the cruise line has officially made a long-rumored move that should make non-smokers really happy while angering a whole different group of the cruise line's passengers.
Image source: Matt Cardy/Getty Images
Oasis-Class Ships Getting Non-Smoking Area
Wonder of the Seas, the newest member of Royal Caribbean's Oasis class was originally built to sail out of China. It was moved to Florida due to the covid pandemic which created a sort of happy accident for non-smokers.
The ship was built with a secondary casino that was originally intended as a high rollers room. Once the ship was repurposed to sail from the United States, that smaller casino was shifted from an area designed to cater to big-money players into a non-smoking casino.
For months, it has been rumored that the cruise line would turn the "Jazz on 4" space -- the same location as the non-smoking "Golden Roon" on Wonder of the Seas -- into similar non-smoking casinos. Royal Caribbean never commented on those rumors, but it did warn passengers on some sailings that service in the Diamond Lounge, an area next to Jazz on 4 reserved for Diamond and higher members of the company's loyalty program, would be disrupted due to construction.
The results of that construction have been revealed on another Oasis-class ship, Harmony of the Seas. Johnny Travalor shared pictures of the new casino in a Facebook group for fans of Royal Caribbean's casinos.
"The brand new non-smoking casino on Harmony officially opened today and I have been here since the opening playing, donating!" he shared.
That's not official confirmation that all Oasis-class ships will have Jazz on 4 turned into a non-smoking casino, but all signs point in that direction.
Royal Caribbean Makes Some Passengers Mad
No change on a cruise ship will make all passengers happy. Some Royal Caribbean gamblers have suggested that the non-smoking area, which is much smaller than the original casino, should be the smoking area.
"Maybe once they see the non-smokers are bursting at the seam in that space and the smoking casino isn’t as crowded they will reverse it," Barb Boyer Green shared.
"That should be the smoking room...seems like the non-smokers are being put in a closet," Maureen Ethier added.
Not all passengers, however, are upset because of the size of the non-smoking area. Some are lamenting the loss of Jazz on 4, which hosted live jazz music.
"I think this is an overall loss, with now an entertainment area being taken over on this ship. I always enjoyed the jazz club and this will do nothing for the smell of the ship, net loss for all passengers" Justin Rogers wrote.
"It was our fav such a sad day. It was our escape, great talent, romantic, not another venue like it. Such a shame," added Julia Doumad.
cdc disease control pandemic chinaInternational
The limits of expert judgment: Lessons from social science forecasting during the pandemic
A sobering picture emerges from a study testing social scientists’ ability to predict societal change during the COVID-19 pandemic.
Share this:
Imagine being a policymaker at the beginning of the COVID-19 pandemic. You have to decide which actions to recommend, how much risk to tolerate and what sacrifices to ask your citizens to bear.
Who would you turn to for an accurate prediction about how people would react? Many would recommend going to the experts — social scientists. But we are here to tell you this would be bad advice.
As psychological scientists with decades of combined experience studying decision-making, wisdom, expert judgment and societal change, we hoped social scientists’ predictions would be accurate and useful. But we also had our doubts.
Our discipline has been undergoing a crisis due to failed study replications and questionable research practices. If basic findings can’t be reproduced in controlled experiments, how confident can we be that our theories can explain complex real-world outcomes?
Predicting social change
To find out how well social scientists could predict societal change, we ran the largest forecasting initiative in our field’s history using predictions about change in the first year of the COVID-19 pandemic as a test case.
To do this, we tested how well social scientists could predict societal change in two ways. First, we asked social scientists for quick guesses about how things would change over the next two years of the pandemic.
Second, we ran a competition where over 100 teams of social scientists with access to historical data made month-by-month forecasts. We formally assessed their predictions for a range of social sciences phenomena, including changes in prejudice, subjective well-being, violence, individualism and political polarization between May 2020 and May 2021.
Our findings, detailed in peer-reviewed papers in Nature Human Behaviour and in American Psychologist, paint a sobering picture. Despite the causal nature of most theories in the social sciences, and the fields’ emphasis on prediction in controlled settings, social scientists’ forecasts were generally not very good.
In both papers, we found that experts’ predictions were generally no more accurate than those made by samples of the general public. Further, their predictions were often worse than predictions generated by simple statistical models.
Improving predictions
Our studies did still give us reasons to be optimistic. First, forecasts were more accurate when teams had specific expertise in the domain they were making predictions in. If someone was an expert in depression, for example, they were better at predicting societal trends in depression.
Second, when teams were made up of scientists from different fields working together, they tended to do better at forecasting. Finally, teams that used simpler models to generate their predictions and made use of past data generally outperformed those that didn’t.
These findings suggest that, despite the poor performance of the social scientists in our studies, there are steps scientists can take to improve their accuracy at this type of forecasting.
Our research also found that, compared to lay people, social scientists were more aware of the herculean nature of the task at hand. In our studies, they expressed uncertainty and less confidence than lay people when making forecasts.
Similarly, social scientists expressed uncertainty in their open-ended predictions for the World after COVID project, a video series we conducted with eminent scholars in the first year of the pandemic.
Thus, social scientists still have some wisdom to offer, reminding us of the uncertainty and the need for humility when forecasting the future.
A call to action
Our work highlights the importance of developing reliable sources of data and suggests strategies that can improve the accuracy of such forecasts.
These results are a call to action for the scientific community to continue developing better methods for predicting societal change so the public can rely on scientists in times of crisis.
Our projects show that expert prediction of societal change during the COVID-19 pandemic was far from perfect. But they also suggest ways such predictions can be improved. By drawing on specific expertise, collaborating across disciplines and making data-driven models, social scientists can produce more accurate and useful forecasts for policymakers and the public.
The scientific community should strive to develop better methods for predicting societal change, while acknowledging the uncertainty and complexity involved. Policymakers should appreciate the value of expert insight, but also be aware of its limitations and potential biases. If we want to predict the future, or shape it for that matter, than a bit of humility would likely help.
Igor Grossmann receives funding from the Social Sciences and Humanities Research Council of Canada, Ontario Ministry of Research, Innovation and Science, The John Templeton Foundation, and the Templeton World Charity Foundation.
Cendri Hutcherson receives funding from the Social Sciences and Humanities Research Council of Canada, the Natural Sciences and Engineering Research Council of Canada, the Canada Foundation for Innovation, the Ontario Ministry of Research and Innovation, and the National Institutes for Mental Health (USA).
Michael Varnum has received funding from the National Science Foundation (USA), the US Fulbright Program, and the China Postdoctoral Science Foundation.
depression pandemic covid-19 canada ontario china
‘Conspiracy At Its Height’: Fauci Responds To Message Saying He ‘Prompted’ Anti-Lab Leak Paper
Please Stop With The Raccoon Dogs
What Follows US Hegemony
Rogoff Warns ‘Things Are Only Getting Harder For The Fed’
Why did a regional US bank failure lead to financial market turmoil?
COVID-19 Vaccines Can Cause ‘Permanent Disabilities,’ Says German Health Minister
The limits of expert judgment: Lessons from social science forecasting during the pandemic
Royal Caribbean Officially Makes Controversial Change
Is The US Funding An Experiment In Digital Control In Ukraine?
-
Government12 hours ago“True Stories… Could Fuel Hesitancy”: Stanford Project Worked To Censor Even True Stories On Social Media
-
Uncategorized8 hours agoFed, central banks enhance ‘swap lines’ to combat banking crisis
-
International5 hours ago
What Follows US Hegemony
-
International21 hours ago
The limits of expert judgment: Lessons from social science forecasting during the pandemic
-
Government18 hours ago
Royal Caribbean Officially Makes Controversial Change
-
Government22 hours ago
Is The US Funding An Experiment In Digital Control In Ukraine?
-
Spread & Containment13 hours ago“The New Normal”: New York To Lower Math And English Proficiency Standards Due To Poor Test Result
-
Uncategorized38 mins agoAustralian Banking Association’s cost of living inquiry reveals bank pressure