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'Headline risks at highest levels due to unpredictability of geopolitical factors'

23 January 20203 min reading

Pedro H. Dejneka, MD Commodities: “The sheer unpredictabilityof geopolitical factors which have enormous effects not only on potential supply and demand fundamentals but also on the behavioral side of markets. Headline risks, both bearish and bullish are at some of the highest levels in history simply because of the total unpredictability of trade flows and other geopolitical factors.”

Interview: Namık Kemal Parlak

Pedro H. Dejneka, a well-known commodity market consultant, gave an interview to Miller Magazine on the factors affecting the international grain trade. He answered our questions regarding the different aspects that influencing the agricultural commodity market. Mr. Dejneka is a Partner and Co-Founder of MD Commodities, a global macroeconomic and agricultural commodity consulting firm with offices in Brazil and in the United States.

What are the most important challenges grain traders are facing today? The sheer unpredictabilityof geopolitical factors which have enormous effects not only on potential supply and demand fundamentals but also on the behavioral side of markets. Headline risks, both bearish and bullish are at some of the highest levels in history simply because of the total unpredictability of trade flows and other geopolitical factors.

How the outbreak of African swine fever in Asia has impacted grain markets? For year grain/oilseed traders acted as if Chinese demand for soybeans were going to increase each and single every year. ASF has been a major factor in changing that false perception that demand was “untouchable”. Traders have had to adjust their long-term projections, with the understanding that the demand side of the equation can oftentimes be as volatile and fickle as supply disruptions.

Consumer awareness in health, origin, environment, climate change and animal welfare has been increasing. How changing global consumption trends will affect the global grain trade flows? These are normal changes of an evolving and developing society. I personally do not believe they will offer major disruptions to trade volume. The focus is simply shifting from purely being on quantity to both quantity and quality. The companies that are able to adjust quicker to this change in consumer demands will be the ones that will lead.

There is Black Sea dominance in the wheat exports. Do you think Black Sea countries could gain more market shares? Absolutely! The Black Sea region has tremendous grain market share growth potential ahead and I foresee that growth will be realized in the coming years…

How will digitalization and blockchain technology affect global trade flows? What are the potential impacts on commodity trading? Greater agility, transparency, and competition.

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