Written Commentary
OPENING COMMENTS
Macroeconomics:
Revisiting the Japanese Yen carry trade unwind we saw back in August. The “yen carry trade” is a strategy taken on by investors that meant they could borrow very cheaply in Japan where interest rates were very low (0.1-0.25%) and use those funds to buy US assets (including stocks etc.) When these investors have to repay Japan for what they borrowed, they sell the US asset and their take-home is the difference between the low interest rate and the (hopefully) higher value on the asset. This starts to unravel if Japan decides to increase interest rates, which they did back in August 2024. They also signaled they will continue to raise rates. Their next meeting is on June 17th. If they raise rates, US markets could take a hit. Our Federal Reserve Board will announce US rates on June 18th. The market is expecting no change as of today. Then the US has a holiday the following day, June 19th. Should be an interesting couple of days for the global markets. Japan’s rice stockpiles have weaken over the last couple years. They typically like to buy locally, but their inflation has been putting pressure on consumers. They may have to import rice, but they have lowered overall international trade since the tariffs were raised. Japan’s farm minister Taku Eto had to step down from his office yesterday due to comments he made about not needing to buy rice because he was always gifted it by supporters. Japan’s rice crisis could offer opportunity for US farmers, but we will need to jump the tariff hurdle first.
The Japanese Yen is back up to levels it was trading when the country announced higher interest rates and caused concern around the unwinding of the carry trade. Golden cross on the 20 and 50-day moving averages.
Tokyo’s Core CPI spiked up again in April. Their next report is Thursday May 29th at 6:30pm. They are expected to raise interest rates again by June 17th.
The US Federal Reserve is most likely going to keep rates unchanged at the June 18th announcement.
Export & World News
Algeria is tendering for another 80K MT of corn for FH June shipment.
Malaysian palm oil futures were down 15 ringgit overnight, at 3893.
Daily Trading Limits: Corn $0.35 (expanded $0.55); Soybeans $0.75 (expanded $1.15); Minneapolis Wheat $0.60 (expanded $0.90); KC Wheat $0.40 (expanded $0.60); Chicago Wheat $0.40 (expanded $0.60)
Weather Outlook
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