“US
Wheat Exports Plunge to 20-Year Low as Mississippi River Dries Up,” by
Michael Hirtzer and Dominic Carey. Bloomberg News (November 6, 2023).
“Drought has dried up the Mississippi, where roughly two-thirds of US grain exports historically have been shipped on barges to the US Gulf. Water levels have
improved slightly from last month’s record low, but the world’s crop
buyers have already been purchasing more supplies from elsewhere. That’s
limited demand for US grain and contributed to the country losing its status as the shipper of choice.”....
....Elsewhere, Hudson Lockett reported yesterday at The Financial Times Online that, “Tumbling pork prices could push China back into deflation this week, as the largest listed hog farmers flood the domestic market and complicate Beijing’s efforts to bolster confidence in the world’s second-largest economy.
“Live hog futures traded on China’s Dalian Commodity Exchange have dropped about 15 per cent since the start of October,
reflecting a sharp deterioration in expectations for nationwide pork
prices. Wholesale pork prices in China are down more than 40 per cent
from a year ago.
“Falling pork prices threaten to push China back into deflation,” by Hudson Lockett. The Financial Times (November 6, 2023).
“Economists say the falling cost of pork, with its heavy weighting in China’s official consumer price index, is likely to tip the country back into deflation when October data is released on Thursday.”....
Our
proxies are hog futures on the Dalian Commodities Exchange. For folks
paying attention, the months-long sideways move, here using the
September futures as the example, the sideways move from mid-January to
mid-April put the lie to the hubbub about the Great Reopening. The move
up from December 2022 was all anticipatory emotion rather than actual
demand:
China's
trade surplus in September 2023 narrowed to USD 77.71 billion from USD
82.67 billion in the same period the previous year, but it exceeded
market forecasts of USD 70 billion, as both exports and imports declined
at the same rate, reflecting persistent weak demand both domestically
and internationally. Exports fell by 6.2% year-on-year, marking the
fifth consecutive month of decline, which was better than the market
consensus of a 7.6% drop. Meanwhile, imports declined by 6.2%, which was
broadly in line with the expected 6% drop and marked the seventh
consecutive month of decrease. The trade surplus with the United States
widened to $33.2 billion in September from $33.1 billion in August.
source: General Administration of Customs
Again, no psychic credentials required to see what was coming:
China isn't reopening, it has reopened.
This is it. And despite the record savings the population has
accumulated over the last three years we are not seeing a wave of demand
in the domestic economy. Using one of the most basic proxies for what
is actually going on, the price of pork, the grand reopening, is, to say
the least, muted. This is especially true considering the country just
celebrated the largest, most festive holiday on the calendar.
*****
One
data point does not make a trend but it does raise the possibility that
the facile expectation of a boom in Chinese consumption is wrong.
What if, and I'm just spitballing here, what if the
giant ball of savings is being targeted by the rapidly aging population
as a retirement cushion, i.e. future consumption, not current?
That would leave China's export economy to carry the weight.
And that is not looking very promising at the moment:....
...If you saw the Chinese export numbers an hour ago you know there is
no Chinese cavalry riding to the rescue of the Western economies.
Chinese imports were flat. No uptick in demand for anything the west
produces. Exports increased 8.5%, showing just how dependent China
remains on the West staying out of recession....
