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Strategic stockpiles of food and other commodities are making a comeback.
The Financial Times earlier this month noted a trend among governments around the world, which decades after dismantling food reserves and putting their faith in global trade, are now rebuilding emergency stockpiles. The report noted that countries from Sweden and Norway to India and Indonesia are rebuilding emergency reserves, holding back rice, wheat and other staples, spooked by fears of a world they see growing increasingly unstable.
Separately, widely followed economist Jeff Currie, chief strategy officer of Energy Pathways at the Carlyle Group, argued that growing geopolitical angst threatens to spur hoarding of a range of commodities.
“To hoard is human,” Currie wrote. He observed that the impetus to hoard often comes not from fears supplies are scarce, but from expectations other people will hoard. He cited the early days of the COVID pandemic, when shoppers snapped up toilet paper and other household essentials not because they feared a structural shortage of toilet paper but because they feared other shoppers would be irrational and ill-informed.
“This is the same logic as a bank run or a bubble – I may not think the vault is empty or the valuations are justified, I just need to think other people will take their money out of the bank or put their money into the stocks,” Currie said. “By the same token, I may not think that oil, or copper, or gold is particularly scarce at the moment – but if I think other people might act as if it is, then I have an incentive to buy oil, or copper, or gold.”
Central bank buying of gold as part of a scramble to diversify reserves, a reaction to Western sanctions on Russian assets, has sparked a scramble for ingots that has been a key driver of gold’s rally above $5,000 an ounce. A “de facto strategic stockpile” of copper has emerged in the U.S., he said, after President Donald Trump announced plans for tariffs on copper and other metals, sparking a rush to take metal out of London Metals Exchange warehouses around the world and ship it to the U.S. for delivery into Comex warehouses.
That’s worth keeping in mind when it comes to expectations that regime change in Venezuela and possibly Iran would automatically mean more oil supply. Instead, Carlyle expects any such shifts in fundamentals to be overshadowed in the next decade by rising geopolitical risks.
“With unrest in Iran and the U.S. in control of Venezuelan exports, it would also come as no surprise if China decided to increase its strategic oil reserve by landing the floating sanctioned barrels. They could swiftly erase the glut’ on the water,” he said.
Currie said the hoarding trend now appears to be widening to include food, as evidenced by the growing shift to emergency stockpiles by governments.
“The end result is a familiar commodities boom/bust cycle – hoarding drives scarcity, which drives prices higher, leading to more investment, resulting in surpluses, and eventually leading to destocking, surpluses, and lower prices,” he said. “The process takes years, if not decades, and is wasteful.”
President Donald Trump said a deal is near on year-round E15. “I am trusting [House] Speaker Mike Johnson, who is great, and [Senate majority] Leader John Thune, who is great...to find a deal that works...for farmers, consumers and refiners, including small and midsize refiners. In other words to get E15 approved. They’re working on it, they’re very close to getting it done,” he told a cheering crowd of supporters in Clive, Iowa. Farm and ethanol groups were angry last week after lawmakers failed to include language authorizing year-round use of a 15% ethanol blend with gasoline, known as E15, in government funding language. House GOP leaders set up a study council charged with submitting legislation next month.
- In a post on X, the Renewable Fuels Association thanked Trump for his “promise to support year-round E15 and for calling on House Speaker Johnson and Senate Majority Leader Thune to find a solution and get it to your desk ASAP for signing.”
The dollar slumped to a four-year low, extending its recent weakness on Tuesday. The ICE U.S. Dollar Index, which tracks the currency against a basket of six major rivals, fell 1.3%. A surging yen has contributed to the weakness, with the Japanese currency surging on the threat of coordinated intervention by Japan and the U.S. But there’s more to the dollar weakness than the yen, with analysts citing uncertainty over tariff policy, U.S. spending plans and other concerns. A weaker dollar lent support to grain futures Tuesday.
- “The dollar dynamics we are observing are not normal,” wrote economist Jens Nordvig, founder and CEO of Exante Data, in a LinkedIn post. Options data shows traders are heavily betting on extreme moves in the euro–dollar exchange rate, even though the actual recent moves in the exchange rate haven’t been that big yet. “There is a historical degree of uncertainty, reflected in the skew relative to spot returns,” he wrote, adding there are “many reasons for this,” including capital flow vulnerability, intervention signals and domestic political tensions.
- Trump, speaking to reporters during his highly anticipated trip to Iowa, said he was comfortable with the weaker dollar. “I mean the value of the dollar, look at the business we’re doing. No, [the] dollar is doing great,” he said, according to CNBC.
Trump threatened to raise tariffs on South Korea, citing delays in approval by the country’s legislature of a trade deal struck in October. legislative approval delays in South Korea’s legislature approving a pact struck in late October with the country’s president, Lee Jae Myung. The move caught officials in Seoul by surprise, the Wall Street Journal said, while sowing fresh doubts among U.S. trading partners about the staying power of Trump’s deals.
- South Korea was the fifth largest country importer of the U.S. agricultural and related products in 2024, according to USDA.
China bought more Canadian canola, Reuters reported, booking up to 10 cargoes following Prime Minister Mark Carney’s visit to Beijing earlier this month. Ten cargoes, or around 650,000 metric tons, would be over 10% of China’s canola imports in 2024 and about 26% of its total imports last year, the report said. During Carney’s visit, China and Canada reached an initial trade deal that slashes tariffs on Chinese vehicles in exchange for lower duties on Canadian canola. While the trade deal was relatively modest, it was seen as marking a major shift in relations between the U.S. and Canada – a notion reinforced by Carney’s speech last week at the World Economic Forum annual meeting in Davos, Switzerland, in which he called for “middle powers,” such as his Canada, to work together to counter the rise of hard power amid a “rupture” in the rules-based global order.
- The Davos speech raised the ire of the White House. Bessent told Fox News on Monday that Carney, in a phone call with Trump, “was very aggressively walking back some of the unfortunate remarks” he made in Davos. Carney on Tuesday denied that he had changed his tune. “To be absolutely clear, and I said this to the president, I meant what I said in Davos,” Carney told reporters.
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