j uly 2011 18 th vo lum e ed I t I o n 4
RISING COMMODITY PRICES EFFECTS ON INVESTMENTS, STRATEGY AND POLICY
S W E D E R VA N WIJNBERGEN JIM ROGERS JEROEN BLOKLAND JOHN STEPHENSON ROB SUBBARAMAN BAS WERKER
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Inhoudsopgave | Colofon
Index Preface E di tor Fi duc i e
5
C a s p er Fr a n sz
Colofon Uitgever Financiële Studievereniging Amsterdam Redactie Casper Fransz (hoofdredacteur) Gabor Ruigrok Druk Grafiplan Nederland B.V. Opmaak Hetgasbedrijf B.V. Advertenties Fiducie verschijnt vier keer per jaar. Voor Advertenties kan contact worden opgenomen met de Financiele Studievereniging Amsterdam © 2010 FSA Hoewel deze uitgave de uiterste zorg is nagestreefd kan
Interviews: Emerging Markets en Commodities
6
Swed er va n W i jn b er g en The Comm odit ies Bul l Market
10
J i m Rog er s Articles: Grondstoffen als belegging;
14
Z ij n de arg um ent en val ide? 3
J er oen Bl okl a n d Com m odit ies : Hyp e or Ha ppen ing ?
20
J oh n S tep h en s on The coming food price surg e
24
Rob S u b b a r a ma n Columns: Dui s enberg s chool of fi nance – as k an ex pert
30
Ba s Wer ker
voor de aanwezigheid van eventuele (druk)fouten en andersoortige onvolledigheden niet worden ingestaan en aanvaarden de auteur(s), redacteur(en) en uitgever in deze geen aansprakelijkheid. Alle rechten voorbehouden. Niets uit deze uitgave mag worden verveelvoudigd, opgeslagen in een geautomatiseerd gegevensbestand, of openbaar worden gemaakt, in enige vorm of op enige wijze, hetzij elektronisch, mechanisch, door fotokopieën, opnamen, of enig andere manier, zonder vooraf gaande schriftelijke toestemming van de uitgever.
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Preface editor fiducie
Rising Commodity Prices For the past decade commodity prices have
manager Blokland analyses the prevalent market
been increasing. While the financial crisis led
conditions of commodities in his article. While
commodities to cool off somewhat, the past year
portfolio manager Stephenson offers a breakdown
has seen commodity prices reaching new highs.
on how to interpret recent events in commodities.
Whereas high energy commodities are a danger to
Focusing on food commodities, Nomura’s Rob
recovering economies, high food prices are related
Subbaraman examines how food prices affect
to be a relevant factor to the recent political unrest
policies differently in various countries. We conclude
in the Arab world. Safe havens such as gold have
this Fiducie with Duisenberg School of Finance
recently hit all-time highs and many investors
expert Bas Werker who offers concise answers on
anticipate the price to go even higher. While recent
student questions.
months have seen some corrections, it seems that prices are likely to continue rising for some time.
This edition of Fiducie marks the end of my role as head editor for the Fiducie. We started this year
Back to basics: commodity prices are based on
with some ambitious goals, most importantly to
supply and demand. If supply remains unchanged
make the Fiducie more attractive to student readers
while demand increases, then prices will increase.
while keeping the standards of the articles high. I
Demand is increasing globally, one of the reasons
believe we have succeeded in that objective through
being that the emerging economies with their
the addition of insightful columns, our collaboration
massive populations are becoming more wealthy. If
with the DSF and most importantly, the high
prices are to remain constant, then supply will need
standard of the contributions of our authors.
5
to increase at the same rate. However, supply is not very elastic as the machinery needed to extract the
Fiducie, the academic journal of the Financial Study
commodities is not ordered overnight. Thus, price
Association Amsterdam is published each quarter
expectations are based on long-term projections.
presenting relevant developments related to business
The current bull market is leading many investors
and economics. I would like to thank you as reader
to consider investing in commodities. This edition of
for your interest and hope you enjoy reading the
Fiducie offers readers an analysis of industry experts
Fiducie.
and academics on commodities. Starting this Fiducie is our interview with renowned investor Jim Rogers. Having been bullish on commodities for over a decade he shares his views with us on some of the reasons behind the current bull market. Our interview with Professor van Wijnbergen explores the effects emerging markets
Casper Fransz Head Editor Fiducie
and commodity prices have on one another. Fund
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emerging markets en commodities
Prof. Dr. S.J.G. van Wijnbergen
Sweder van Wijnbergen is professor of economics at the Faculty of Economics and Bussiness at the University of Amsterdam. In 1997 Hans Wijers brought him in to the Ministry of Economic Affairs, where he worked as secretary until 1999. Van Wijnbergen studied physics at Utrecht University and Econometrics at the Erasmus University. He obtained his doctorate on economics at MIT in the US. Between 1980 and 1992 van Wijnbergen was attached to the World Bank, in the second half of this period as head
6
Interview door Wouter Hogervorst
economist. His research area is focused on international economics, finance, balance of payments- and
en Gabor Ruigrok
financial crises.
Vanaf het begin van deze eeuw zien we een
volgens de theorie gaan mensen dan extractie
maken zich daar ook zorgen over. Als zij naar het
duidelijke trendverschuiving dat de prijzen van
aanpassen zodat deze dezelfde return geeft
efficiency niveau kunnen waar wij nu op zitten,
commodities stijgen en dat de volatiliteit omhoog
als een investering ergens anders. Dit is in de
wij hebben ons verbruik ongeveer gehalveerd de
gaat. Vaak wordt de “schuld” daarvan gegeven aan
praktijk heel moeilijk te verifiëren omdat de
afgelopen 30 jaar, dan kunnen zij dat ook. En
de opkomst van Emerging Markets. Bent u het hier
extractie afhankelijk is van de zogenaamde rental
naarmate energie duurder wordt ontstaat er ook
mee eens?
component (prijzen minus extractie kosten) en die
voor deze landen een grotere prikkel.
Daar ben ik niet zo van overtuigd omdat er geen
weet je niet omdat extractiekosten verschillen per
duidelijke breuk is in de groeivoet van Emerging
regio. Zo zijn ze erg laag in Saoedi-Arabië en
Als China naar westerse energie efficiency gaat, zou
Markets begin 2000. China en India groeiden al
erg hoog in Canada. Maar dat er een stijgende
die een factor 4 efficiënter worden. Zodra zij dit
langer hard en dat zijn de twee grootste groeiers
trend bestaat, dat is structureel bij uitputtende
doen kunnen ze nog een erg lange tijd doorgroeien
onder deze landen, zowel qua omvang als van
grondstoffen. En daar is ook niks mis mee, dat
zonder extra energieverbruik. Je ziet nu dat ze
groeisnelheid. Dus als er een breuk is vanaf 2001 of
heeft een functie. Dat wil zeggen dat naarmate
beginnen met het omgooien van hun energiebeleid,
2002 in commodities, waarom zou dat dan komen
ze schaarser worden, de prijs stijgt en mensen
India doet dat volgens mij nog niet. Wel zit er een
door een proces dat al langer aan de gang is en dat
harder zoeken naar alternatieven. Dat is ook het
drang op voor al deze landen omdat zij, op Brazilië
geen breuk vertoond in die periode? Dus het lijkt
gene wat een rem op dit proces zet.
na, allen energie importeurs zijn. Zij kunnen niet
me onwaarschijnlijk dat dit allemaal te verklaren valt door China.
eeuwig doorgaan met subsidiëren want dat kost Ik weet tevens niet of de vraag naar grondstoffen
heel veel geld.
in de Emerging Markets zal blijven groeien want er Je moet ook voorzichtig zijn dit als een trend
is iets anders karakteristiek aan Emerging Markets
Heeft de commodity boom een groot effect op de
te verklaren. Wat je bijvoorbeeld ziet bij olie,
en dat is dat ze behoorlijke inefficiënt omgaan met
inflatie binnen Emerging Markets?
de commodity die ik het beste ken, is dat de
energie. De meeste Emerging Markets subsidiëren
Mogelijk wel, dit hangt in hele sterke mate
afgelopen anderhalve eeuw een verrassend
het gebruik van energie, China is bijvoorbeeld
af van het wisselkoersbeleid wat zij voeren. Ik
stabiel plaatje laat zien qua prijzen. Soms zijn
ongeveer twee jaar geleden begonnen met het
denk dat inflatie in China momenteel meer te
er periodes van een jaar of 10 met hele hoge
uitfaseren van het subsidiëren van energie, terwijl
maken heeft met vraag stimulatie dan met de
volatiliteiten en hele hoge uitslagen. Het is nog
wij energie gebruik zwaar belasten, althans, de
stijgende prijzen van commodities. Ze zijn daar
niet duidelijk of we niet weer zo een periode
meeste soorten van energie gebruik. Je ziet ook dat
momenteel de economie aan het opjagen. Het
hebben. In principe verwacht je dat commodities
landen als China als proportie van hun nationaal
is waarschijnlijk waar dat commodity booms
met een eindige voorraad een sterkere trend
product ongeveer drie tot vier keer zoveel energie
tot inflatie leiden, maar het hoeft niet. Als ze
hebben dan de inflatie; de verwachting is dat de
gebruiken als wij, en ze zullen er op den duur wel
een strak monetair beleid hebben dan is het een
reële prijs stijgt. Naarmate ze schaarser worden
achterkomen dat dat een slecht idee is. Ook zij
relatieve prijsaanpassing. Wel is de inflatie in een
zouden ze een hogere prijsvoet hebben, en
hebben namelijk last van global warming en ze
land als China op het moment nog niet zo hoog.
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“Ik heb dus geen grote inflatieangst, zowel niet door commodities als door stijgende prijzen in China” Het zal momenteel wel iets hoger zijn dan voor
Dus mits deze landen een goed sociaal beleid voeren,
de crisis, maar dan heb je het over 6 à 7 procent.
hoeft dit niet tot problemen te leiden?
De reden dat mensen zich in een land als China
Een boerenopstand zal niet vaak voorkomen
zorgen maken over inflatie is niet dat je bang bent
want daar wonen mensen te ver van elkaar af. Als
dat het onstabiel wordt, maar ze maken zich meer
mensen dicht bij elkaar wonen is de organisatie van
zorgen over sociale onrust. Wat gebeurt er als bij
een opstand makkelijker en men durft ook meer
mensen hun lonen of pensioenen niet geïndiceerd
in een menigte. Daarom zijn de steden de meest
zijn? Dan heb je wel veel boze mensen. Maar het
politiek gevoelige plekken. Het risico is vooral of
is niet zo dat China, zoals in Latijns-Amerikaanse
de politieke elite de sociale onrust in de steden
landen in de jaren 80, hyperinflatie zal krijgen met
kan beheersen. Dat is dan ook de reden dat je vaak
duizenden procenten per jaar.
ziet dat in landen waar dit risico aanwezig is het
7
voedsel in de steden gesubsidieerd wordt maar op Als we het iets meer algemeen bekijken naar armere
het platteland niet.
landen waar voedsel een groter deel is van de income share, denkt u dat de stijgende prijzen over de langere
Kijkend naar Europa dan zijn sommige economen erg
termijn een probleem zijn?
bang voor second round inflation doordat de lonen in
Dat ligt, in het speciaal bij voedsel- en
landen als China erg zullen stijgen en dat daardoor
landbouwprijzen,
de goederen voor ons duurder zullen worden. Denkt u
wat
ingewikkelder.
De
verschillen zullen daarbij niet zozeer zijn tussen
dat dit een serieus gevaar is?
rijke en arme landen maar meer in gebieden
Dat hangt van het monetair beleid af. Het is waar
binnen de armere landen. Hoge landbouwprijzen
dat de Chinese loonkosten hard aan het stijgen
zijn prima voor mensen die op het platteland
zijn, sneller dan de inflatie tevens. China is steeds
wonen en landbouwproducten verkopen en die
minder een goedkoop lonenland aan het worden.
netto meer produceren dan dat ze zelf eten. Deze
Mensen gaan ook weg naar landen als Vietnam en
mensen gaan er op vooruit. Waar het slecht voor is,
Bangladesh. Er zijn mensen die beweren dat China
is voor de mensen in de stad. Hoge voedselprijzen
een rem is geweest op de Westerse inflatie omdat er
kunnen slecht zijn voor de verhoudingen binnen
een stortvloed van goedkope Chinese producten op
een land, het is niet per definitie slecht vóór een
de markt kwam. Dan zou je kunnen denken dat als
land. De meeste armoede is vaak niet in steden,
de Chinese lonen stijgen het resulteert in inflatie.
maar op het land. Ik ben er niet van overtuigd dat
Dit zal een effect hebben al verwacht ik niet dat dit
dat zo slecht is.
een erg groot effect zal zijn.
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Hoewel China enorm groeit, is het van nog
was van Frankel. Waar Dornbusch dit toepaste op
gaan produceren maar hier gaat een land als Iran
geen enkel land een héle grote handelspartner, in
de wisselkoers ten opzichte van goederen prijzen,
weer tegenin, aangezien zij al maximaal produceren
Nederland zelfs heel klein. Uiteraard heeft China
doet Fränkel dit met commodities ten opzichte van
en daarom de hoge olieprijs wel mooi vinden.
bij iedereen ongeveer een handelsoverschot, en
goederen.
voorlopig zal dit nog wel blijven. Maar het zijn geen
8
Is het verstandig als aanbieder van olie om de prijs
hele grote percentages die wij van hun importeren.
Er zijn mensen die beweren dat de olieprijscrisis
hoog te houden door aanbod te limiteren?
Of dit zal leiden tot hogere inflatie hangt af van
helemaal niets met hoge inflatie te maken heeft
Daar zit een risico op want hoge prijzen moedigt
het monetair beleid van Trichét. In praktijk zou
gedurende de jaren 70. De piek in de olieprijs die
mensen ook aan om verder te zoeken naar andere
het een feeder voor inflatie kunnen zijn, maar
toentertijd heeft plaatsgevonden was veel hoger
bronnen. De monopolie positie van de OPEC
dat is wanneer Trichét het laat lopen. Tot nu toe
dan de huidige, waar periodes van heftige groei
wordt ondermijnt door de hoge olieprijzen. Dat
heeft de ECB zich daar vrij netjes in gedragen. Ik
en crashes elkaar afwisselden. Dat is een periode
is precies waar die Saoedi’s zich zorgen over
heb dus geen grote inflatieangst, zowel niet door
die is samengegaan met hoge inflatie naar onze
maken. Bij een olieprijs van $110 wordt het
commodities als door stijgende prijzen in China.
maatstaven. Nu zijn er steeds meer mensen die
voor Canadezen heel interessant om teerzand te
beweren dat die periode eigenlijk een reflectie was
ontginnen. De voorraad olie in die teerzanden is
Jeffrey Frankel beweert met zijn overshooting-model
van monetair beleid; als monetair beleid beter was
vergelijkbaar met Saoedi-Arabië, alleen is het in
dat een erg los monetair beleid een commodity boom
geweest dan was die inflatie niet zo hoog. Een
Canada veel duurder om het uit de grond te halen.
kan aanjagen. Bent u het daarmee eens?
centrale bank mag dit niet laten gebeuren. Hoe
Bovendien moeten er chemicaliën bij gebruikt
Wat hij daarmee stelt is dat commodity prijzen
eerder deze ingrijpt hoe goedkoper dit is, in termen
worden die het erg slecht maken voor het milieu.
gevoeliger zijn dan gewone prijzen. De reden
van recessie. Dit ingrijpen is een beetje van de rails
Aangezien de olieprijs nu zo hoog blijft is het
daarvoor is dat een flink deel van commodities in
gelopen omdat we twee jaar geleden wel een heel
een kwestie van tijd voordat Canada daarmee
spot markets worden verhandeld, die erg volatiel
grote klap hebben gehad met onverwacht grote
gaat beginnen. Dus Saoedi-Arabië kan wel de
kunnen zijn. Als commodities enkel verwerkt
negatieve groei. Trichet heeft toen eigenlijk heel
prijs willen opvoeren, maar dan verliezen zij de
zouden worden in goederen zit er meer vertraging
accommoderend gereageerd en is momenteel aan
monopolypositie in de markt. Daarom willen ze
in het proces. Daar worden dingen besteld,
het aanscherpen, maar het zou goed kunnen dat dit
liever zelf de stabiliserende factor zijn en nieuwe
gemaakt, afgeleverd en er worden jaarcontracten
de commodity boom gevoerd heeft.
bronnen gaan aanboren. Als Canada namelijk de
opgesteld waar lonen in verwerkt zitten. Ik denk
beslissing neemt om te ontginnen en zij hebben
wel dat Frankel gelijk heeft, zo kan olie met 40%
Stabiliserende factoren in tijden van hoge
een pijplijn aangelegd en nieuwe machines laten
omhoogspringen in een maand, en dat zal met de
commodity prijzen zijn dat er minder vraag
bouwen, dan blijven zij een lange tijd ontginnen
consumer price index niet zo snel gebeuren. Dit is
komt maar ook dat er meer aanbod kan komen.
omdat de vaste kosten al zijn gemaakt. Dat willen
tevens ook wat het Dornbusch-model zegt. Niet
Saoedi-Arabië vindt bijvoorbeeld het risico van
ze liever voorkomen omdat OPEC er anders de
erg verwonderlijk aangezien Dornbusch de leraar
onstabiliteit groot waardoor ze meer output willen
komende 30 jaar mee zit opgescheept.
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“Als belegger kun je wel een risico aangaan dat je inmiddels niet of zelden terug kunt vinden in Westerse markten“ “Hongersnoden hebben niet te maken met te weinig voedsel maar met het feit dat een bevolking niet de koopkracht heeft om voedsel te kopen“ Voor olie zijn er potentieel nieuwe, duurdere,
Een punt wat vaak wordt aangekaart is dat er
bronnen. Is het bij voedsel lastiger om productie te
een verschuiving is in de economische machten in
vergroten?
de wereld. Dit komt mede door de schulden die
Dat vind ik niet per se. Daar ben ik het
veel westerse landen hebben. Denkt u dat stijgende
niet mee eens. Er zijn allerlei marges
commodity prijzen bijdragen aan deze verschuiving?
waarop je voedselproductie uit kan breiden.
Dat is niet zo duidelijk, onder andere omdat
Één is natuurlijk ontbossen voor nieuw
het niet zo is dat alleen ontwikkelingslanden
landbouwgrond, maar dat loopt in een aantal
commodities exporteren. De grote commodity
landen tegen milieuproblemen aan omdat
exporteurs zijn Amerika, Australië, Engeland en
die bossen dienen als carbon-sinks. Aan de
Noorwegen. Het is nogal een wisselend beeld.
andere kant is er al jarenlang een geweldige
Brazilië was tot voor kort een importeur maar dat
technologische vooruitgang die de efficiency
gaat nu door hun olievondsten veranderen. Het is
verhoogd. Een deel daarvan is omstreden,
een heel erg wisselend beeld.
9
denk aan genetische manipulatie. In Europa is genetische manipulatie redelijk controversieel, al vind ik dat geen hele logische houding.
For reactions, please mail to [email protected]
Dat is een rem op productiviteitsstijging, dan creëer je eigen voedselproblemen. Maar over het algemeen is de ervaring van de afgelopen eeuwen dat voedselproductie niet het probleem is. Hongersnoden hebben niet te maken met te weinig voedsel maar met het feit dat een bevolking niet de koopkracht heeft om voedsel te kopen. Er komt zeker druk op landen naarmate China rijker wordt en meer vlees wil gaan eten. Waar voor de productie meer calorieën voor nodig zijn dan voor een gegeven hoeveelheid
calorieën
boterhammen. Als
iedereen in de wereld de westerse eetgewoontes wilt krijgen dan komt er wel een bepaalde druk op te staan.
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the commodities bull market
Jim Rogers
Jim Rogers is an investor who currently lives in Singapore. He studied at Yale University and Oxford University. In 1973 he co-founded the Quantum Fund with George Soros. Jim Rogers is the creator of the Rogers International Commodities Interview by Casper Fransz and Gabor Ruigrok
Index (RICI).
What do you see as the most important factor on the
been an astonishing winner because supply went
Europe, America and Japan are almost ten times
supply side that has lead to the current bull market in
down faster than demand. Therefore, even though
as big as the Chinese economy. India’s economy
commodities?
demand decreases you can still have a bull market.
is only a third of Chinese. Therefore, it is going to
Commodity prices depend on supply and
10
take a lot more than growth in Asia to continue the
demand. The most important factor on the supply
There are many who relate the rise of the emerging
side is that there has been very little investment
markets to the bull market in commodities. What is
current bull market.
in productive capacity for twenty-five years. For
your opinion on the relation between countries like
Are there any particular commodities where you
example, the reserves for oil are declining and no
China and the current bull market in commodities?
foresee imminent structural changes to the supply and
giant elephant size oil fields have been discovered
Wherever you have economic expansion there is an
demand picture?
since the 60s. Another example is lead; where the
increase in demand. There are three billion people
Throughout history there have always been
last lead smelter in America was built in 1969.
in Asia who did not participate (much) in the world
structural changes and there will be again. For
Also, I think only one lead mine has been opened
economy in the last commodity bull market. In
instance, pipes used to be made of lead, then they
in the last 25 or 35 years. Finally, the average age
the 1970s China had not yet introduced market
started making pipes out of copper and after that
of farmers in America is 58 years old and there
economy forces as they did in the last decades.
they were made from PVC. But all of those things
are parts of Japan where there are no farmers
India’s economy was being ruined by isolationist
are commodities. They have to be made out of
at any age.
powers. There had been civil war in Pakistan which
something. Lead and copper are commodities
resulted in the country being split and Vietnam
while PVC is made from a component of oil. Even
However, understanding commodities is never
was also destroyed by war. In those times there was
if there is substitution, products are always made of
only about supply or only about demand. If
not much happening in Asia acting as an upward
some type of commodity.
demand drops and supply drops even faster,
force to commodity prices. Still commodities
then you will still have rising prices. Take the
experienced a big bull market in those days. This
Speaking of oil, in the 1960s it was considered
commodity lead for example. In my book ‘Hot
time around, we have three billion who invest as
impossible to drill deeper than 2000 meters. The
Commodities’ I have a chapter about lead as a
much as they can in order to have the same living
same was true for gas. Also, offshore drilling – in
teaching point. Lead has lost two of its major
standards that we have in the developed world.
the ocean – was inconceivable. Technology made
demand elements. It used to be in petrol and it
That is certainly an important element to what is
it possible to drill deeper. Currently the record
used to be in paint. Nowadays, you do not find
currently happening.
is past 10,000 meters. Technological innovations
lead in either of those products. Therefore, a
such as Hughes diamond drill bit revolutionized
naïve investor might conclude that the price of
However, Asia is not the only element. America,
drilling. These discoveries did not stop oil going
lead has gone down over the past decades as 35%
Europe, Japan are still the major players and South
up ten times in the 1970s. At the time, we knew
of the demand has disappeared. However, if you
America and Africa are also growing more than
there was oil coming. For example, there had
look at the price of lead you will notice it has
in the past. Demand is growing everywhere but
been discoveries in Alaska, the North Sea and
1027-1075 FSA-Fiducie-1106-04.indd 10
12-07-11 10:23
“Agriculture as a class is probably the one that I am most optimistic about“ Mexico. Nevertheless, it took too long for that oil
or we will not have any food at any price. Earlier I
to reach markets. Eventually, after the oil from
stated that the average age of farmers in America
the new investments did come to markets, the
is 58 years old. Japan has many fields in for which
prices went down for quite a while. Structural
there are no farmers at all. Farming has been a
or technological changes always have been
terrible business for thirty years and unless prices
important and will continue to be important in
increase we are not going to have any farmers and
a commodity like oil.
thus no food. The only solution is for food prices to go up much higher than they are now, in order
Are there any commodities you track with special
to attract new capital and people. Otherwise, in
interest?
ten years those farmers will be 68 years old – if
I am probably more interested about agriculture
they are still alive.
11
than other commodities. Those prices are still very depressed on a historic basis. Still, there are
The popularity of farming all over the world
no commodities for which I am bearish. There
is not great. For example, every year America
will always be corrections, which are setbacks to
produces about twenty times as many financial
an investor. Those will continue to occur, but I
graduates as it produces agricultural graduates.
am optimistic about all of them over the decade.
The number of agricultural and mining degrees
Agriculture as a class is probably the one that I am
is very small in America in contrast with thirty
most optimistic about.
or fifty years ago.
Increased food commodity prices have been related by
What could be the effect on commodity prices if
some to the uprisings in parts of the world, notably
and when the FED exits it current expansionary
the Middle East. Could supply of food commodities as
monetary policy?
a result become more elastic?
Throughout history when countries have debased
Certainly food is more relevant to people who
currencies – debased money – it has led to higher
spend 40% of their income on food then it is to
prices for real assets. People do not want to sit there
people who only spend 10% of their income on it.
and have money which declines in real value. In
Once you see more social unrest in the world as
the current situation this is a factor. The policies of
food prices go up, there will be more governments
central banks are a factor in the current bull market
and countries that are likely to fail. I believe the
and it leads to increased demand, but it is not the
price of food has to increase over the next ten years,
only factor.
1027-1075 FSA-Fiducie-1106-04.indd 11
12-07-11 10:23
Eigen klanten is voor mij een uitdaging
12
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12-07-1116:53:40 10:23 24-02-2010
6:53:40
“Quote“
“The financial collapse stopped or delayed many projects that would have created new supply“ Early May 2011 many commodity prices dropped.
Are we correct in understanding that the crisis has in
What is your interpretation of this drop?
some way made the bull market in commodities even
The best thing that can happen is for a market is to
stronger in the long run?
have corrections. Markets that go straight up enter
It certainly delayed new supply. Of course, as I said
a parabolic move and all parabolic moves collapse.
before, commodities are a function of both supply
What is happening is normal and reasons will
and demand. As long as you do not have new
become apparent. But it is good for the market. In
supply and demand is increasing, then commodity
1987, for example, stock markets around the world
prices will go up.
went down 40% to 80% for artificial reasons. There was forced liquidation. Many people panicked and sold out. But the people who understood what was
For reactions, please mail to [email protected]
13
going on bought more and in the end stocks went up another 10 times over the decade. You will see more corrections and these corrections just scare people who might otherwise create new supply. That is a good thing for investors in commodities who will see the commodity prices rising even more on the long run. It also happened in 2008 when AIG and Lehman Brothers went bankrupt which lead to huge forced liquidation in commodities for a five month period. Smart people were buying in that period. Normally when you are nine years into a bull market, people start bringing in new supply as opportunities are becoming more apparent to everyone. The financial collapse stopped or delayed many projects that would have created new supply. Some of the supply which should be coming on-stream nowadays is not. This makes the current situation more bullish then before.
1027-1075 FSA-Fiducie-1106-04.indd 13
12-07-11 10:23
grondstoffen als belegging; Zijn de argumenten valide? Jeroen Blokland
Jeroen Blokland is momenteel fondsbeheerder van zowel de Robeco Life Cycle Funds als van Robeco Vermogensbeheer. Hiervoor werkte hij als research analist bij IRIS, het onafhankelijke research bureau van Rabobank en Robeco.
Jeroen Blokland In de afgelopen tien jaar hebben grondstoffen zich
economische groei de vraag naar grondstoffen groot,
Een
ontwikkeld tot een volwassen beleggingscategorie.
ongeacht wat de economie over enkele maanden doet.
grondstoffen wordt toegedicht, is dat ze bescherming
Zo vinden we grondstoffen steeds vaker terug in de
andere
aantrekkelijke
eigenschap
die
bieden tegen inflatie. De gedachte is dat grondstoffen
strategische asset allocatie van pensioenfondsen.Maar
De laatste jaren is het spreidingsargument van
een intrinsieke waarde vertegenwoordigen wat ze
ook voor particuliere beleggers is het tegenwoordig
professionele beleggers een beetje naar de achtergrond
waardevast maakt. Grondstoffen worden dan ook
relatief eenvoudig om in deze beleggingscategorie
geduwd. De ‘nieuwe’ grondstoffenbeleggers gaan
vaak aangeduid als een reële beleggingscategorie
te beleggen. Bij de onderbouwing voor een allocatie
vooral voor koerswinsten. Zij trachten te anticiperen
waarvan de waarde minimaal de inflatie reflecteert.
naar grondstoffen worden vaak vier argumenten naar
op de explosieve vraag naar grondstoffen en de
Dit in tegenstelling tot bijvoorbeeld nominale
voren geschoven: spreiding, toenemende schaarste,
toenemende schaarste aan grondstoffen die we dit
obligaties. De reële waarde van de kasstromen die
inflatiebescherming en backwardation. In dit
decennium kunnen verwachten. En schaarste leidt
nominale obligaties genereren nemen af wanneer
artikel wil ik stilstaan bij deze vier argumenten en
naar goed economisch gebruik tot hogere prijzen.
de inflatie stijgt.
volgt dat spreiding, toenemende schaarste en
De
Backwardation
inflatiebescherming, weliswaar tot op zeker hoogte,
grondstoffenbeleggers is niet zo vreemd. Afgaand
Het laatste argument betreft backwardation. Dit
een grondstoffenbelegging kunnen verantwoorden.
op de voorspellingen van de Verenigde Naties zal de
is niet zo zeer een eigenschap van grondstoffen
Maar de aanname dat backwardation een
wereldbevolking tot zeker 2050 blijven groeien. In
zelf, maar meer van het instrument waarmee in
karaktereigenschap is van grondstoffenfutures kan
dat jaar wordt onze aarde bevolkt door meer dan 9
grondstoffen wordt belegd. Omdat het niet rendabel
mijns inziens niet worden gedaan.
miljard mensen. Dit alleen is natuurlijk al goed voor
is om vaten olie of een vrachtlading koper in je
een flinke toename van de mondiale consumptie
tuin op te slaan, worden grondstoffenbeleggingen
toetsen in hoeverre zij valide zijn. Uit mijn analyse
14
Spreiding,
toenemende
en
van
de
nieuwe
en van de vraag naar grondstoffen. Toch zal de
in de regel ingevuld met termijncontracten, ofwel
inflatiebescherming
toename nog veel groter zijn dan op basis van de
futures. Het rendement op een grondstoffenfuture
Laat ik beginnen met een korte beschrijving van
bevolkingsgroei mag worden verwacht. De groei van
is samengesteld uit drie delen. In de eerste plaats het
de vier argumenten die pleiten voor opname van
de wereldbevolking concentreert zich in opkomende
spotrendement. Dit is de dagelijkse prijsontwikkeling
grondstoffen in de (strategische) portefeuille. Het
landen waar de inkomens snel stijgen door de sterke
van een grondstof zoals wij die herkennen uit de
‘oudste’ argument is spreiding. Ruim voor de eerste
economische groei. Dit samen leidt de komende
krant etc. Het tweede deel van het futurerendement
particuliere beleggers in aanraking kwamen met
jaren tot een in historisch perspectief spectaculaire
is het zogenaamde ‘collateral rendement’. Bij een
deze beleggingscategorie, zagen pensioenfondsen
toename van de mondiale middenklasse. Het
belegging in een future hoeft maar een fractie van de
en Amerikaanse universiteitsfondsen het belang van
is juist die combinatie van bevolkingsgroei en
onderliggende waarde te worden ingelegd (margin).
de lage samenhang (correlatie) van het rendement
stijgende inkomens die leidt tot een niet eerder
Het restant kan worden belegd tegen de risicovrije
op grondstoffen met het rendement op meer
vertoonde toename van de consumptie. Immers,
rentevoet. Een koper van een future ‘ontvangt’ dus de
traditionele beleggingscategorieën zoals aandelen
die middenklasse in opkomende landen, een paar
prijsverandering van de betreffende grondstof en een
en obligaties. Die lage correlatie is het resultaat van
miljard mensen, wil logischerwijze ook in een
extra rendement op het restant van de onderliggende
het afwijkende patroon van grondstoffenprijzen
fatsoenlijk huis wonen, van een ijskoude cola uit de
waarde dat op de spaarrekening wordt gezet.
door de economische cyclus. In tegenstelling tot
koelkast genieten en met een gloednieuwe bolide
de rendementen op aandelen en obligaties lopen
over de zojuist aangelegde zesbaanssnelweg naar het
Het derde deel betreft het rolrendement. Dit
de prijzen op grondstoffen minder vooruit op de
werk gaan. De hoeveelheid grondstoffen die nodig is
rendementsdeel wordt bepaald door de vorm van de
economische ontwikkelingen. Zo is in tijden van hoge
om dit te realiseren is ongekend groot.
futurescurve. Futures met verschillende looptijden
1027-1075 FSA-Fiducie-1106-04.indd 14
schaarste
gedachtegang
12-07-11 10:23
vormen een (denkbeeldige) lijn of curve. Wanneer de
Figuur 1 Backwardation & Contango
futuresprijzen lager liggen dan de huidige spotprijs is
Positief rolrendement
sprake van backwardation (zie figuur 1). Naarmate de looptijd korter wordt, schuift de prijs van de future omhoog richting de spotprijs. Om te voorkomen
Contango
dat de grondstoffen fysiek worden geleverd, dient
Backwardation
de futurepositie met een korte resterende looptijd te worden ‘doorgerold’ naar een futurepositie met
Negatief rolrendement
een langere looptijd. In het geval van backwardtion wordt dus een future met een hoge prijs verkocht
fu tu re
fu tu re
aa nd s
aa nd s 9m
In dit scenario ligt de futuresprijs juist boven
10 -m
fu tu re
aa nd s
fu tu re 8m
aa nd s
fu tu re 7m
aa nd s
fu tu re 6m
aa nd s 5m
4m
aa nd s
fu tu re
fu tu re
aa nd s
fu tu re 3m
2m
1m
De tegenhanger van backwardation is contango.
aa nd s
ontvangt als gevolg van het doorrollen is nu positief.
aa nd s
Sp ot pr ij
s
blauwe pijlen in de grafiek). Het rendement dat je
fu tu re
en een future met een lagere prijs teruggekocht (zie
de spotprijs ligt. De futuresprijs schuift omlaag
bent. Het is ook belangrijk je te verdiepen in
van backwardation. Je ontvangt dus als het ware
naarmate de looptijd korter wordt en dat houdt in
de werking en het verloop van de futurescurve.
een ‘bonusrendement’.
dat het doorrollen nu juist een negatief rendement
En dat is behoorlijk complex. Aanbieders
oplevert (zie zwarte pijlen in figuur 1).
van
grondstoffengerelateerde
producten
15
De proof of the pudding
bieden de helpende hand. Zij wijzen er op
Hiermee zijn de vier belangrijkste argumenten die
Bovenstaande impliceert dat je er met alleen
dat historisch gezien het rolrendement op
pleiten voor een belegging in grondstoffen benoemd.
een visie op de prijs van grondstoffen nog niet
grondstoffenfutures positief is geweest als gevolg
Maar worden deze argumenten gestaafd door de praktijk? Ik begin met inflatiebescherming. In figuur
Verandering in inflatie
Figuur 2: correlatie inflatie & rendement
Niveau van inflatie 0,80
2 is de correlatie weergegeven tussen het rendement op een aantal verschillende beleggingscategorieën en de Europese inflatie. Ik kijk daarbij zowel naar het niveau als de verandering van de inflatie. Het is
0,60
vaak de verandering in de inflatie waarop beleggers 0,40
trachten te anticiperen.
0,20
Uit figuur 2 volgt dat grondstoffen de sterkste positieve samenhang vertonen met de inflatie.
-0,40
1027-1075 FSA-Fiducie-1106-04.indd 15
Vastrentend staatsobligaties
Kasgeld
Aandelen wereldwijd
Grondstoffen ind. metalen
Grondstoffen edelmetalen
Onroerend goed
Grondstoffen agri
Vastrentend bedrijfsobligaties
Bron: Bloomberg, Datastream, Robeco
Aandelen materials
Aandelen energie
Grondstoffen energie
-0,20
Grondstoffen
0,00
Opvallend is dat de correlatie het hoogst is voor de beleggingscategorie als geheel. Daarbinnen zijn er behoorlijke verschillen. De agrarische en energiegerelateerde grondstoffen scoren het hoogst. Dat is niet zo verrassend aangezien energie en
12-07-11 10:23
voedsel belangrijke componenten zijn in het mandje goederen waarover het Europese inflatiecijfer wordt bepaald. Zo betekent een hogere olieprijs vrijwel direct een hogere benzineprijs. De relatie tussen de
0,80
Figuur 3: correlatie grondstoffen vs aandelen & obligaties
0,60
0,40
inflatie en het rendement op edelmetalen, lees goud, is beduidend minder sterk. Dat duidt er op dat goud
0,20
ten onrechte wordt gezien als de ideale bescherming tegen inflatie.
niet te letterlijk worden genomen. Ook al is er
-1 1
-0 9
ja n
-0 7
ja n
-0 5
ja n
-0 3
ja n
-0 1
ja n
-9 9
ja n
-9 7
ja n
-9 5
ja n
-9 3
ja n
-9 1
ja n
-8 9
ja n
-8 7
ja n
-8 5
ja n
-0,20
ja n
Het woord ‘bescherming’ moet hier bovendien
ja n
-8 3
-
-0,40
duidelijk sprake van een positieve samenhang tussen het grondstoffenrendement en (de verandering in) de inflatie, de relatie is niet perfect. Bovendien verbergt dit cijfer het gegeven
16
-0,60
-0,80
Aandelen vs Grondstoffen
Grondstoffen vs Obligaties
dat de beweeglijkheid van het rendement
de tijd heen afgebeeld. Wat opvalt, is dat de correlatie
Samengevat kan worden gesteld dat spreiding nog
op grondstoffen vele malen groter is dan de
zeker niet constant is. Weliswaar is de samenhang
steeds een argument vormt om grondstoffen op te
beweeglijkheid van de inflatie. Dat betekent dat de
over de gehele periode gering, maar door de tijd heen
nemen, zeker voor de langetermijnbelegger, maar
omvang van het rendement vaak niet vergelijkbaar
kan de correlatie zowel in positieve als in negatieve
ook dat dit argument wel aan erosie onderhevig
is met de gerealiseerde inflatie. In die zin is er dus
zin flink oplopen. Met andere woorden soms helpen
is. De kans is bovendien aanwezig dat de positieve
geen sprake van absolute bescherming.
grondstoffen de portefeuille veel minder te spreiden
samenhang tussen aandelen en grondstoffen
dan gedacht en omgekeerd.
voorlopig aanhoudt en wellicht zelfs nog sterker
Toenemende correlatie
wordt. Paradoxaal genoeg ligt de oorzaak hiervan
Het volgende argument dat ik wil toetsen is
Daarnaast springen de laatste jaren in de grafiek er
in een ander argument dat pleit voor grondstoffen,
spreiding. De beste portefeuille is immers een
uit. Daarin loopt de samenhang met het rendement
namelijk toenemende schaarste.
portefeuille met de beste verhouding tussen risico
op aandelen sterk op, terwijl de samenhang met het
en rendement. Juist die diversifiërende rol is wat
obligatierendement flink negatief wordt. Voor wie
De nieuwste generatie grondstoffenbeleggers is
behoudende beleggers, zoals pensioenfondsen, heeft
denkt dat dit elkaar mooi opheft in portefeuillecontext
vooral geïnteresseerd in koerswinst en veel minder
bewogen om deze risicovolle belegging aan boord
komt bedrogen uit. Doordat de beweeglijkheid van
in spreiding. Zij zien kansen in de combinatie
te nemen.
het aandelenrendement vele malen groter is dan van
van de groeiende wereldbevolking en de stijgende
het obligatierendement, domineert de relatie tussen
inkomens in opkomende landen. En afgaand
Om
de
aandelen en grondstoffen. De laatste jaren is de
op de rendementen van de laatste jaren lijkt die
spreidingscapaciteiten van grondstoffen kunnen
een
indruk
mate van spreiding van een portefeuille met daarin
schaarste al zichtbaar te worden. Maar omdat het
we opnieuw correlaties gebruiken. In figuur
aandelen, obligaties en grondstoffen dus afgenomen
rendement de belangrijkste drijfveer is, proberen
3 is de samenhang tussen het rendement op
door de oplopende positieve relatie tussen de twee
die nieuwe beleggers de koersontwikkeling te
grondstoffen en het rendement op de traditionele
meest volatiele beleggingen in die portefeuille,
voorspellen. Wanneer moeten ze in- of uit stappen
beleggingscategorieën aandelen en obligaties door
aandelen en obligaties.
om het beste resultaat te behalen. Hierdoor zijn de
1027-1075 FSA-Fiducie-1106-04.indd 16
te
krijgen
van
12-07-11 10:23
“De vorm van de curve hangt dus af in hoeverre de producent of de afnemer zich genoodzaakt voelt om het prijsrisico af te dekken“ grondstoffenmarkten op de aandelenmarkten gaan
verkopers zijn van futures en er dus ook altijd sprake
lijken met een hogere correlatie als gevolg.
is van (normal) backwardation.
Backwardation is niet ‘normaal’
Er zijn verschillende theorieën die de normal
Dan rest nog de veronderstelling van backwardation
backwardation van Keynes nuanceren. Het ligt
als een vierde pluspunt voor grondstoffen. De
buiten het bereik van dit artikel om ze allemaal
reden om dit argument als laatste mee te nemen
te bespreken, maar het werk van Cootner
is tweeledig. In eerste plaats heeft de toetsing van
(1960) en Deaves & Krinskey (1995) zijn
deze veronderstelling meer voeten in de aarde.
goede voorbeelden. Zij stellen dat als de markt
Maar daarnaast is deze veronderstelling wat mij
in contango is, waarbij de futuresprijs boven
betreft niet terecht. Dit in tegenstelling tot de
de spotprijs ligt, ook sprake kan zijn van een
andere argumenten die toch tot op zeker hoogte
risicopremie. Alleen gaat die nu niet naar de
zijn te staven. Het gemak waarmee aanbieders
belegger maar naar de grondstoffenproducent.
van grondstoffengerelateerde producten deze
Anson (1999) illustreert dit aan de hand van
aanname doen, is mij dan ook het doorn in het
een voorbeeld. Olieproducent Exxon beschikt
oog. In het laatste deel van dit artikel ga ik daarom
over voorraden olie om de markt te bedienen.
uitgebreid op de vraag of grondstoffen worden
Prijsrisico’s kunnen, uiteraard tegen betaling van
gekenmerkt door backwardation, ofwel dat het
een verzekeringspremie, worden afgedekt door de
rolrendement gemiddeld genomen positief is (zie
verkoop van futures. Er is in deze situatie sprake
grafiek 1).
van
backwardation.
17
Aluminiumconsument
Boeing echter beschikt niet over eigen Bij die aanname wordt vaak verwezen naar de ‘normal
voorraden aluminium en kan de invloed van
backwardation’ theorie van Keynes. Die theorie stelt
prijsschommelingen reduceren door aankoop
dat er sprake is van normal backwardation indien de
van futures. Boeing betaalt nu de premie aan de
futuresprijzen lager liggen dan de huidige spotprijs1.
aluminiumproducent en de markt is in contango.
Grondstoffenproducenten kunnen hun toekomstige
De vorm van de curve hangt dus af in hoeverre de
prijzen ‘verzekeren’ door middel van de verkoop van
producent of de afnemer zich genoodzaakt voelt
futures. Kopers van futures, bijvoorbeeld beleggers,
om het prijsrisico af te dekken2.
ontvangen een premie in ruil voor hun bereidheid om grondstoffen in de toekomst te kopen en
Met behulp van de S&P Goldman Sachs
zodoende dus de prijsrisico’s van de producenten
Commodity (SPGCI) Index kan relatief
over te nemen. Die risicopremie komt tot uiting
eenvoudig worden nagegaan in hoeverre in het
in een futuresprijs die lager ligt dan de spotprijs.
verleden sprake is geweest van backwardation
Keynes’ gedachte is dat de risicoaversiteit van
in grondstoffenmarkten. Voor de 24 individuele
grondstoffenproducenten ertoe leidt dat zij altijd de
futurescontracten
en
de
vijf
subindices
1. De theorie van normal backwardation stelt feitelijk dat de futuresprijs onder de toekomstige verwachte spotprijs ligt. Echter, omdat deze spotprijs per definitie onbekend is, werkt men in de praktijk met de huidige spotprijs om te bepalen of er sprake is van backwardation of contango. 2. Deze theorie wordt aangeduid als de hedging pressure hypothese
1027-1075 FSA-Fiducie-1106-04.indd 17
12-07-11 10:23
100%
per maand opgenomen voor de 24 individuele
Figuur 4 Grafiek 1
Figuur 4: Aantal maanden met een positief rolrendement (sinds inceptie)
grondstoffen en de vijf subindices. Uit de grafiek
90%
volgt dat op alle vijf de subindices het rolrendement
Bron: S&P Goldman Sachs Commodity Index, Datastream
80%
per saldo negatief is geweest. Twee daarvan (Agricultural en Precious Metals) zijn statistisch
70%
significant. Van de 24 individuele futurecontracten
60%
uit de SPGSCI hadden er 20, ofwel meer dan 80%,
50%
een negatief rolrendement. Voor maar liefst 12 van die 20 grondstoffen is het rolrendement statistisch
40%
significant. Het rendement op de vijf overgebleven
30%
grondstoffen met een positief rolrendement was
20%
in geen enkel geval significant. De conclusie van deze data is duidelijk. Niet backwardation,
10%
maar contango is de meest voorkomende Zinc
Aluminum
Natural Gas
GSCI Precious
Gold
Silver
Wheat (Kansas)
Nickel
GSCI Agricultural
Cacao
GSCI Industrial
Lead
Heating Oil
Corn
Soybeans
Gas Oil
Feeder Cattle
Wheat (CBOT)
Coffee
Copper
Sugar
Cotton
GSCI Energy
Brent Oil
Live Cattle
Crude Oil
Live Hogs
GSCI Livestock
structuur binnen de grondstoffenfutures. Als er al een bonusrendement valt te verdienen op grondstoffenfutures is het negatief.
Page 1
Metals,
Dit beeld wordt bevestigd door de rendementen. In
van grondstoffengerelateerde producten toch zo
Industrial Metals en Energy) is het spot-,
figuur 5 zijn het gemiddelde spot- en rolrendement
vaak backwardation naar voren brengen als een
0,005
en op de subindex Livestock is meer dan de helft van de tijd positief. Voor iets wat als normaal wordt verondersteld, is dat toch behoorlijk weinig. Het is juist contango wat het meest voorkomt in de grondstoffenfuturemarkt.
1027-1075 FSA-Fiducie-1106-04.indd 18
Natural Gas
Corn
Wheat (Kansas)
Cacao
Silver
Wheat (CBOT)
Gold
Sugar
Aluminum
Zinc
Coffee
Cotton
Lead
Gas Oil
GSCI Precious
-0,01
GSCI Agricultural
zich. Alleen het rolrendement op Unleaded Gasoline
Feeder Cattle
een positief rolrendement. De cijfers spreken voor
-0,005
Brent Oil
procent van de maanden er sprake is geweest van
Soybeans
0
individuele future of elke subindex weer hoeveel
GSCI Industrial
nu daadwerkelijk is. De figuur geeft voor elk
Datastream
0,01
GSCI Livestock
‘normaal’ backwardation in grondstoffenmarkten
Bron: Goldman Sachs Commodity Index,
0,015
Nickel
Figuur 4 geeft een goede indicatie over hoe
Bron: Goldman Sachs Commodity Index,
Figuur en rolrendementen rolrendementen Figuur 5: 5: Gemiddelde Gemiddelde spotspot- en Datastream
GSCI Energy
maximaal 1969.
0,02
Live Cattle
maandelijkse rendementen die teruglopend tot
Crude Oil
collateral en rolrendement vastgelegd. Ik gebruik
Copper
Precious
Heating Oil
Agriculture,
Unleaded Gasoline
(Livestock,
De vraag rijst natuurlijk waarom aanbieders
Live Hogs
18
Unleaded Gasoline
0%
-0,015
-0,02
-0,025
-0,03
Roll return
Spot return
12-07-11 10:23
“Niet backwardation, maar contango is de meest voorkomende structuur binnen de grondstoffenfutures“ aantrekkelijke eigenschap van grondstoffen? Eén
zitten haken en ogen. De spreiding is niet meer wat
van die redenen is olie. De twee oliefutures (Brent
het geweest is, de toenemende schaarste betekent
en Crude) hebben samen een gewicht van ongeveer
niet dat grondstoffen geen cyclisch karakter meer
van 50% van de index. En doordat het rolrendement
hebben en de relatie met inflatie is niet perfect.
op deze futures in het verleden vaak positief was,
Backwardation is wat mij betreft een minder valide
domineerden zij het rolrendement voor de totale
argument. Grondstoffenfutures kenmerken zich
grondstoffenindex. Echter, met de toenemende
meer door contango dan door backwardation.
schaarste aan olie is het maar de vraag of dit ook in de toekomst zo blijft. Schaarste betekent hogere prijzen in de toekomst en dus oplopende
For reactions, please mail to [email protected]
futuresprijzen. De laatste jaren lijkt dit scenario al te worden bevestigd. Van de afgelopen 36 maanden was het rolrendement op Brent en Crude in slechts 2 respectievelijk 3 maanden positief. Een tweede belangrijke reden dat aanbieders van grondstoffengerelateerde producten backwardation
19
als pluspunt noemen, is dat zij steeds actiever op zoek gaan naar de beste plaatsen op de futurescurve. Waar voorheen vooral passief werd gerold van de future met de kortste looptijd naar de future met de op één na kortste looptijd, verschijnen er nog steeds meer strategieën die over de gehele futurescurve actief zijn. Hoewel dit betekent dat de kans op een positief rolrendement toeneemt, mag dit niet zonder meer als karakteristiek voor grondstoffen worden gezien. Conclusie In dit artikel heb ik vier belangrijke argumenten onder de loep genomen die pleiten voor een opname van grondstoffen in de portefeuille. Daaruit volgt dat spreiding, toenemende schaarste, en bescherming tegen inflatie tot op zekere hoogte valide argumenten zijn om een grondstoffenbelegging te overwegen. Echter, staar je niet blind op deze argumenten. Aan elk van deze drie argumenten
1027-1075 FSA-Fiducie-1106-04.indd 19
12-07-11 10:23
commodities: hype or happening?
John Stephenson
John Stephenson is an award-winning portfolio manager and Senior Vice-President with First Asset Funds Inc. in Toronto. He is the author of “The Little Book of Commodity Investing” and “Shell Shocked: How Canadians Can Invest After the Collapse.” He is also the publisher of Money Focus (www.reportonmoney.com). He
John Stephenson
can be reached at 1-416-640-3283 or [email protected].
Volatility has been the order of the day for
Also blamed for the commodity correction were
Noting about commodities is bush-league; in 2009,
investors in the commodity markets. First, they
speculators who were thought to be behind silver’s
the production value of seven of the most important
were the go-to sector of the market, then, they
dramatic surge. But, that all unwound in a hurry
commodities was north of $3.6 trillion. The value
weren’t. For some, the top of the market was seen
when the Chicago Mercantile Exchange (CME)
of the commodities traded on the world’s futures
as the initial public offering of shares of Glencore,
raised margin requirements three times in a week
exchanges dwarfs the dollar volume of transactions
a commodities powerhouse. The reasoning was
to pop a suspected silver bubble. Silver, the poor
on U.S. stock exchanges. Commodities and the
simple. If the guys most in the know were going
man’s gold, tumbled on the news from nearly $50 per
exchanges that set prices and marry up buyers and
public, then surely the commodities market had
ounce to just over $30 per ounce, before recovering.
sellers of these crucial raw materials are so important
seen its top. But for most, the main worry was
20
to our way of life that the world as we know it
that China, the world’s second-largest economy
To be sure, speculators are always present in
and biggest commodity consumer, was slowing
commodity markets, but their impact is almost
wouldn’t be possible without them.
down.
always exaggerated by regulators and politicians
Yet, in spite of the crucial role that commodities play
looking to score points with their various
in our everyday lives, they get short shrift. Plenty of
What Goes Up…
constituents. But what overly-zealous regulators
experts are happy to weigh in to espouse the merits
The prospect of a global economic slowdown,
seem to forget is that speculators, or those who don’t
of stocks, and the benefits of bonds, not to mention
coupled with a devastating earthquake in Japan,
want to hold a physical position in the commodity,
real estate. But commodities, come on! There just
was enough to take the bloom off the rose of the
are the grease that allows the commodity markets to
isn’t much of a fan club. But, despite an absence of
commodity trade. Over the last few months, a
function by greasing the wheels and providing much
cheerleaders, the investment merits for commodities
widespread sell off has occurred in silver, copper, oil
needed liquidity.
are an easy sell and a valuable portfolio inclusion.
But while there are tens of thousands of stocks
Fundamentally Speaking
And while May saw some steep declines in
to choose from, there’s only about fifty different
While there are lots of factors that can influence
commodity prices, many commodity prices had been
traded commodities—and some only thinly. So,
the price of commodities in the here and now,
holding steady or been falling for months. Sugar was
like smaller-capitalization stocks, these thinly
longer term it’s all about supply and demand. In
already 35 percent off its February high before the
traded commodities can be more impacted by large
the short term, demand has the most impact on
May madness struck.
investors eager to enter or exit their positions; taking
commodity prices. If demand increases, prices are
price along for the ride.
sure to follow. But in the long term, supply is what
and other key commodities.
There’s no shortage of explanations for the fall in
drives commodity prices. And supply takes a long
commodities, everything from a bearish research
Nothing Bush-League About Them
note from Goldman Sachs & Co. to the looming
Commodities are real things that we rely on every
end of the U.S. Federal Reserve’s quantitative
day. From the time we get up to the time we go
The demand for commodities is rising because of
easing program added fuel to the fire. Weak
to bed, we are surrounded by commodities. The
the rapid reordering of the global economic pecking
economic data fuelled jitters that America’s
coffee we drink and the sugar we sweeten it with
order. According to research by TD Securities
recovery had stalled, while India’s central bank,
are commodities, so too are the steel that holds are
Economics, in 1987 one-third of the world’s
along with others, raised interest rates to combat
cars together, the oil that makes them run, and the
economic output came from developing economies
inflation.
natural gas that heats our homes.
and two-thirds came from developed economies. By
1027-1075 FSA-Fiducie-1106-04.indd 20
time to respond to an increase in demand.
12-07-11 10:23
the end of 2009, their contributions were evenly split.
and without warning in response to inventory
1953, which was once again followed by a rout that
But by 2020, two-thirds of the world’s economic
reports, the weather, speculative activity and, of
lasted fifteen years. The last great commodity bull
activity will come from developing economies, while
course, the overarching forces of supply and demand.
market was thought to occur during the 1970s, but
the so-called rich world will be responsible for just
Commodities go through long periods when prices
it actually began in 1968 and ran till 1982.
one-third.
boom and then extended periods when they bottom out. When supply is low and demand suddenly
Best Yet
Shell-shocked investors watched in horror as the
starts to shift into overdrive, you can be sure that
According to the Yale International Center for
commodity markets tumbled with the collapse of
an extended period of strong commodity prices lies
Finance, commodity futures have been shown
Lehman Brothers in September 2008. Executives at
ahead.
to offer the same returns as stocks with a similar
commodity-producing companies nearly went into
amount of risk.1 Better still; commodities tend to
cardiac arrest as their share prices cratered, forcing
Today, there is plenty of talk about how commodities
perform best when stocks and bonds are heading
them to slash expenses just to keep their companies
are in the midst of a super cycle. To true believers,
lower, making them a welcome addition to a well-
afloat—mines were closed, oil fields were capped,
the insatiable demand from rapidly industrializing
diversified investment portfolio. The researchers in
and steel mills slammed shut.
countries such as China is proof positive that we are
the Yale study also found that commodities provide a
in the throws of a super cycle. And many expect
much better hedge against inflation, or rising prices,
The business of commodity production is both
that demand growth for commodities will exceed
than either stocks or bonds. Since investors care
capital and time intensive. In most cases, extensive
the rates witnessed in the 14-year commodity run
about their real—or inflation-adjusted—purchasing
geological studies, exploration drilling, testing and
from 1968 to 1982.
power, commodities not only help diversify
permitting are necessary before production can
21
investment portfolios, they also help preserve wealth,
even begin. Once an initial deposit of oil, zinc,
Much of the underpinning for the commodity
potash or copper is discovered, it takes a minimum
super cycle is based on the pioneering work of
of eight years to bring that mine or oil field into
Simon Kuznets, a 1971 winner of the Nobel Prize
The reason why commodities tend to perform
full production. Lead times for obtaining most
in economics. In his work, Kuznets conducted
so well as a portfolio addition is that it is the
major pieces of equipment are measured in years,
extensive research on emerging markets concluding
demand for these essential goods that helps to
not months. In addition, a severe shortage of well-
that massive infrastructure development leads to a
drive inflation higher. As basic raw materials,
qualified people and investment capital means new
twenty-year demand cycle in commodities.
commodities are directly linked to the components
sources of commodity supply will be a long time
since their value is tied to real assets.
of inflation, making them ideal inflation hedges.
in coming. Sluggish supply and voracious demand
Long commodity booms are invariably followed by
Inflation erodes the value of a bond and stock
have set the stage for a massive bull market in
big commodity busts. Recent history is replete with
portfolio, but not a commodity portfolio. High
commodities.
examples of the long-dated commodity cycle. From
levels of inflation are associated with booming
1906 to 1923, the world witnessed a commodity
economies and surging demand for commodities.
The Dawning of a New Age
boom which was promptly followed by a bust that
Strong demand for commodities translates into
Commodity markets still manage to confound and
lasted until 1933. This was followed by a commodity
higher prices for them, which more than offsets
confuse even the experts—changing course rapidly
boom that lasted for a full 20 years from 1933 until
the effects of inflation. As a result, commodities
1. Gary B. Gorton and K. Geert Rouwenhorst, “Facts and Fantasies About Commodity Futures” (working paper), Yale International Center for Finance, Paper No. 04-20, June 14, 2004.
1027-1075 FSA-Fiducie-1106-04.indd 21
12-07-11 10:23
provide purchasing power protection.
That’s
trend of declining prices, there have been powerful
Helping spur the recent rally in corn futures
important, because investors care about their real—
booms in commodity prices, some lasting as long as
was the release of another industry report from
or inflation-adjusted—purchasing power.
thirty-nine years.3
respected agricultural consultancy OTR Global,
In a world of too much complexity and too few
The Charge of the Commodity Bull
the 2011 corn season. Rather than confirming the
solutions, investors are looking for something
The recent market correction, which shaved roughly
USDA’s bullish outlook of around 92 million acres
simple, something tangible, where the accounting
ten percent off the April, 2011 highs, the stage has
of corn plantings, OTR Global came in with a more
isn’t flawed and the path forward is clear. As real
been set for renewed bullishness for the sector.
sobering estimate of 88 million acres. Their channel
things that you can hold and touch, things that you
While slower global growth is likely a given, it should
checks with key agricultural executives suggested
use everyday, commodities seem to be the solid store
still be sufficient to tighten key supply-constrained
that severe weather across vast areas of U.S. growing
of value in these troubled times.
commodity markets leading to higher prices for the
regions is causing downward revisions for the corn
balance of 2012. My favorite commodities for the
planting estimates.
which suggested an entirely different outlook for
22
A second paper published by the Yale International
balance of the year are agricultural commodities, oil
Center of Finance built on the earlier work of
and copper.
professors Gorton and Rouwenhorst establishing
Corn prices are likely to rise over the balance of the year as it becomes apparent that the USDA’s
an empirical link between commodity inventories
There’s a mad scramble underway in the American
estimates represent a “best case” scenario where both
and risk premiums.2 What they discovered was
Corn Belt to get seed in the ground before it’s too
acreage and yields are likely to be revised downward
that superior investment returns could be generated
late. Complicating matters is Mother Nature.
in the months to come. Demand from China is
by investing in futures of commodities with low
Much of the American Mid West has gotten too
another wild card that could cause corn prices to
inventory levels. In much the same way that a low
little rain, while the corn growing region has been
spike in the months ahead.
price/earnings ratio (P/E ratio) can be a harbinger of
suffering from a deluge of rain, which has left many
outsized equity returns, low commodity inventories
fields flooded and unable to hold seed or fertilizers.
China used to be a big exporter of corn, but today,
can act as a signal of superior investment returns.
And the prospect of a poor corn harvest could
China is a major importer of corn and likely to
In short, supply and demand trump all other
help underpin surging corn prices—a bonanza
demand even more corn in the months and years
considerations in commodity investing and a solid
for farmers and a looming crisis for much of the
ahead. While the Street had expected U.S. corn
understanding of the fundamentals is your gateway
world’s poor.
exports to top 2 billion bushels this year, the USDA
to making money in commodities.
report seemed to suggest that corn exports would Despite the flooding-related delays to corn planting,
be somewhere between 1.8 and 1.9 billion bushels.
Over time, commodities help chop your overall
the U.S. Department of Agriculture (USDA) in its
This seems unlikely especially when you consider
level of risk and in the short run, strong swings in
May 9, 2011 report seemed rather bullish on the
that China has just 10 to 15 million metric tons in
commodity prices can make you a lot of money.
prospects for the upcoming American corn harvest.
state reserves versus their long-term average of 35 to
According to the International Monetary Fund,
The USDA report called for 92.2 million acres
40 million metric tons.
real returns actually fall modestly for commodities
dedicated to corn in this growing season. And the
over long periods of time. Over the period from
report’s release had a predictable outcome for the
Winter wheat prices have also been heading skyward
1862 to 1999, for example, commodity prices fell a
futures price for corn—it tumbled from well north of
lately as droughts have impacted the southern states.
mere 1.3 percent a year. But within that long-run
$7 per bushel to $6.60 per bushel before recovering.
If prices for wheat remain in nosebleed territory,
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12-07-11 10:23
“Over time, commodities help chop your overall level of risk and in the short run, strong swings in commodity prices can make you a lot of money” some corn farmers may switch from corn to wheat,
able to bring on additional capacity is Saudi Arabia,
China watchers believe that the second quarter
further tightening the supply/demand balance for
a country that does not allow independent third
of 2011, will mark the low point in the country’s
corn.
party verification of its oilfields. If Saudi Arabia has
industrial output. Activity for the balance of the
exaggerated its production capabilities, there is no
year is expected to grow and inflationary prices are
plan B for an oil-hungry planet.
expected to ease—two huge positives for copper
But with margins per acre for corn at six times the five-year average, most farmers will be scrambling to
demand. Not only that, but for the first time in
plant as much corn as possible. But time is running
But today, chaos is sweeping the Middle East
months, the Shanghai/London Metals Exchange
out. Corn takes many months to grow and anything
and once again talk is turning to the political risk
(LME) arbitrage window is open which should
planted after the end of May runs the risk of a fall
associated with oil. While the focus is now on
serve to underpin copper prices in the near term.
frost. The likely consequence of the current field fight
Libya, it doesn’t take much imagination to see
is lower than anticipated corn acreage and yields,
that tomorrow the focus could be on Nigeria,
Commodities zig when stocks and bonds zag,
higher exports and rising farm incomes.
Saudi Arabia or Algeria. But behind the political
and this often-overlooked but crucial part of the
science of regime change, is a more worrisome
investing landscape is about to get its much-deserved
The other likely beneficiary of rising corn prices will
possibility—that the Saudi oil miracle may be
due once more.
be the shares of fertilizer companies. Over the past
over. And if it is, the supercharged prices of crude
15 years, about 90% of the performance of fertilizer
oil we’ve been witnessing lately may be just the
equities occurs in the back half of the year. The
beginning.
23
For reactions, please mail to [email protected]
reason for this is simple. Fertilizer equities are highly correlated with crop futures prices, which tend to
With non-OPEC production struggling, the
rise in the late summer and fall as the optimistic
market is reliant on oil inventories and OPEC
forecasts for acreage and crop yields from the May/
spare capacity to balance supply with demand. It
June planting season, fail to materialize. Not to
is likely only a matter of time until OPEC spare
mention, that the fertilizer has already been applied
capacity and inventories will become effectively
by the time the seeds are in the ground and poor
exhausted, a condition that will result in much
weather only increases the likelihood that additional
higher prices to clear the market. I would look
fertilization must occur.
toward the recent correction in oil as a good entry point for investors.
For oil, it is solid world economic growth that continues to drive oil demand growth. According
Copper has sold off recently as a variety of data
to the International Energy Agency (IEA) World
points suggested that China’s industrial production
Energy Outlook 2008, production from currently
may be slowing. And while it is certainly possible
producing fields is expected to start declining in
that China may experience some further economic
2009. The call on OPEC spare capacity is about
weakness before resuming a growth trend, now
to get louder, but the only producer claiming to be
would seem like a good entry point into copper.
2. Gary B. Gorton, Fumio Hayashi and K. Geert Rouwenhorst, “The Fundamentals of Commodity Futures Returns,” Yale International Center for Finance, Yale ICF Working Paper No. 07-08, September, 2008. 3. Gary B. Gorton and K. Geert Rouwenhorst, “Facts and Fantasies About Commodity Futures” (working paper), Yale International Center for Finance, Paper No. 04-20, June 14, 2004.
1027-1075 FSA-Fiducie-1106-04.indd 23
12-07-11 10:23
the coming food price surge Rob Subbaraman
The coming food price surge
Rob Subbaraman is Nomura’s Chief Economist, Asia ex-Japan and Joint Head of Fixed Income Research, Asia exJapan. Based in Hong Kong, his team of nine economists is fully integrated in Nomura’s
Introduction1
Global Economics team and supports various arms of the firm, including fixed-income,
and investment banking. Prior to joining Nomura in October 2008, Rob was We expect a multiThe surge in commodity prices in 2003-08 wasequities the largest, longest and most broad-based of any year food price Rob Subbaraman at Lehman Brothers for 12 surged years and atthe Reserve Bankbut of Australia seven years. commodity boom since 1900. The prices of energy and metals most, it wasforthe surge...
agricultural market that saw the most fundamental change. It may not take much of a disruption in food supply to trigger another surge in prices given that the dynamics level, havea sustained becomesurge a whole lot Introduction1 08 food price boom was exacerbated by trade in food prices is simply a more uncertain as a result of new and some increasingly powerful influences acting on both sides The surge in commodity prices in 2003-08 was protectionism and market speculation. relative price change, the income redistribution is of the food supply-demand equation. Indeed, droughts this year in Russia and Kazakhstan and the largest, longest and most broad-based of unambiguously negative from a social perspective severe flooding in Pakistan and China have sent global wheat prices higher, while meat and sugar any commodity boom since 1900. The prices of Macro impact and policy responses because it hurts poor countries the most, thereby prices have hit 20-year highs, despite lacklustre growth in many of the advanced economies. 2 energy and metals surged the most, but it was the
“Tell me what you eat, and I will tell you what you
increasing global poverty and income inequality.
agricultural market that saw the most fundamental are.” ~ Anthelme Brillat-Savarin, The Physiology In the medium run, rising food prices should elicit ... on rising demand, We expect another multi-year food price rise, partly because of burgeoning demand from the change. It may not take much of a disruption in of Taste, 1825. a global supply response by incentivising increased supply constraints world’s rapidly developing – and most populated – economies, where diets are changing towards a and feedback loops investment in agriculture, but just how high food food supply to trigger another surge in prices given
higher calorie intake. We believe that most models significantly underestimate future food demand
prices would need toThe rise tosupply restore equilibrium is that the dynamics have become a whole more Th e impact a sustained surge in food prices on the as they fail to take intolotaccount the wideof income inequality in developing economies.
unclear. macroconstrained economy can varyby signifi cantly, depending on being diminishing agricultural productivity gains and powerful infl uences acting on both sides of the food whether or not the country is 1) a large agricultural competing use of available land due to rising trends of urbanization and industrialization, while supply-demand equation. droughts this 2) a large foodgreater importer or exporter; Inflation supply has Indeed, also become more producer; uncertain duenetto use of biofuels, global warming and year in Russia and Kazakhstan and severe fl ooding and 3) rich or poor in terms of GDP per capita. The most obviouspowerful: macroeconomic impact of a surge increasing water scarcity. Feedback loops also seem to have become more the in Pakistanincreasing and China havedual sent global wheat prices For energy poor countries that and importfood most prices, of their food, food prices is higher Consumer Price Index (CPI) causation between prices and atinleast some evidence that 8ofSeptember 2010 higher, while meat and sugar prices have hit 20the impact of such a deterioration in the terms infl ation. Th e eff ects can be acute in developing the 2007-08 food price boom was exacerbated by trade protectionism and market speculation. uncertain as a result newfood and some increasingly side of ofthe equation is
24
3
year highs, despite lacklustre growth in many of the
trade can be devastating: a sharp decline in GDP
economies where households spend a greater share
advanced economies.
growth, a surge in CPI inflation, worsening fiscal
of their income on food, and so the weight of food
Macro impact and policy responses finances, higher interest rates and a depreciating The coming food price surge
in the CPI basket is much larger than in advanced
We expect another foodyou price rise,and currency. richwhat countries are~large net countries. For most advanced countries, the food “Tellmulti-year me what eat, I will tellFor you you that are.” Anthelme Brillat-Savarin, partly because ofThe burgeoning demand of from the Physiology Taste, world’s rapidly developing – and most populated
price inflation spiral, leading to a rise in underlying CPI inflation. This food price-driven un-
importers the macroeconomic impacttoisbe lessmore weighting in developing the CPI basket is 10-20%, whereas it 1825. anchoringofoffood inflation expectations tends common in economies, because 1) food is often the of net the household negative, whereas richprincipal countriescomponent that are large is about budget one-thirdininlower-income China, 46% ineconomies; India and over
andin2)food central banks on in developing are generally less independent in setting Impact of high food The impact ofchanging a sustained prices economy can vary significantly, – economies, where diets are towards asurge exporters of food can benefi t. the Whilemacro at theeconomies global 50% in many low-income countries such as Nigeria, monetary policy, and thus are less credible as inflation fighters. prices varies depending on whether or not the country is 1) a large agricultural producer; 2) a large net food higher calorie intake. We believe that most models significantly
rich or poor in terms of GDP per capita. For poor countries that Figure 23. The food share in household consumption versus GDP per capita in 2008 most of the their as they failimport to take into account widefood, income the impact of such a deterioration in the terms of trade can be 80 Nigeria a surge in CPI inflation, worsening fiscal finances, a sharpThdecline inequality devastating: in developing economies. e supply in GDP growth, 70 interest rates and abydepreciating Morocco currency. For rich countries that are large net importers side of thehigher food equation is being constrained 60 Azerbaijan of food the macroeconomic impact is less negative, whereas rich countries that are large net diminishing agricultural productivity gains and India 50 food can benefit. level, a sustained surge in food prices is simply competingexporters use of availableofland due to rising trends While at the global China Greece 40 a relative price change, the income redistribution is unambiguously negative from a social of urbanization and industrialization, while supply Kuwait Germany UK 30 Switzerland perspective because it hurts poor countries the most, thereby increasing global Luxembourg poverty and has also become more uncertain due to greater use 2 20 In the medium run, rising food prices should elicit a global supply response inequality. Brazil Israel of biofuels,income global warming and increasing water Norway Japan Denmark 10 Netherlands by incentivising increased investment in agriculture, but justUShow high food prices would need to scarcity. Feedback loops also seem to have become 3 rise to restore equilibrium is unclear. 0 more powerful: the increasing dual causation Share of food in household spending (%)
importer or exporter; 3) significantly underestimate future food and demand
0
Inflation
between energy prices and food prices, and at least some evidence that 8 September 2010 the 2007-
20000 40000 60000 80000 120000 8100000 September 2010 Nominal GDP per capita in US$ at market exchange rates
Source: FAO, Seale, USDC, World Bank and Nomura Global Economics.
It can add to inflation in countries with high food weight in CPI
The most obvious macroeconomic impact of a surge in food prices is higher Consumer Price Monetary policy Index (CPI) inflation. The effects can be acute in developing economies where households spend Central banks tend to Historically, central banks have been slow to respond to surges in food and other commodity a greater share of their income on food, and so the weight of food in the CPI basket is much respond to core, not prices, preferring to take a “wait and see” approach, especially given that, historically, commodity inflation...countries. For most advanced countries, the food weighting in the CPI larger than in food advanced price rises have been more transitory than secular. For a central bank, the question of whether or basket is 10-20%, whereas it isnot about one-third in interest China, 46% India on and overthe 50% to respond by raising rates reallyindepends whether initialin risemany in headline CPI 4 by rising inflation expectations and inflation starts feeding into non-food core CPI inflation, fuelled low-income countries such as Nigeria, Vietnam and Bangladesh (Figure 23). A sustained surge higher wage demands. in food prices can have more pernicious effects if it unmoors inflationary expectations, impelling 1027-1075 FSA-Fiducie-1106-04.indd 24 12-07-11
10:23
Vietnam and Bangladesh (Figure 23).4 A sustained
fuelled by rising inflation expectations and higher
surge in food prices can have more pernicious effects
wage demands.
if it unmoors inflationary expectations, impelling workers to demand higher wages to compensate
For advanced economies, given that food has a
for rising food costs, thus setting off a wage price
relatively low weighting in the CPI basket, the rise
inflation spiral, leading to a rise in underlying CPI
in headline CPI inflation should be relatively mild.
inflation. This food price-driven un- anchoring of
This limits the risk of second-round inflationary
inflation expectations tends to be more common
effects, and so central banks are typically not in a
in developing economies, because 1) food is often
hurry to raise rates on the basis of a rise in food
the principal component of the household budget
prices.5 For instance, during the 2007-08 period the
in lower-income economies; and 2) central banks in
US Federal Reserve was cutting rates because of a
developing economies are generally less independent
deteriorating growth outlook. The European Central
in setting monetary policy, and thus are less credible
Bank hesitated for months to react to the rise in
as inflation fighters.
headline inflation, finally hiking rates by only 25bp in July 2008, before cutting them aggressively after
Monetary policy
25
the collapse of Lehman Brothers.
Historically, central banks have been slow to respond to surges in food and other commodity
For developing economies, a food price surge should
prices, preferring to take a “wait and see” approach,
have a much larger impact on headline CPI inflation
especially given that, historically, commodity price
and consequently carries with it a greater risk of
rises have been more transitory than secular. For
feeding through to core inflation; it also hurts GDP
a central bank, the question of whether or not to
growth more than in advaLunxceemdbocuorguntries.
respond by raising interest rates really depends on
Given this inflation/growth trade-off and given that
whether the initial rise in headline CPI inflation
central banks in developing economies generally
starts feeding into non-food core CPI inflation,
having less monetary policy independence than their
1. The authors of particular parts are in general acknowledged in their respective sections, but specific mention should be made of Mixo Das, Amy Lee, Ann Wyman, Nikan Firoozye, Jim McCormick, Laurent Bilke, Emma Liu, Aatash Shah and Tanuj Shori. We are grateful to Candy Cheung, Ketaki Sharma, Harriet Reeves, Lefteris Farmakis and Irena Sekulska for data analysis; David Vincent for editing; and Jay Chandrasekharan for designing the front cover. We are also indebted to Paul Sheard for reading through the document and providing helpful comments. Responsibility for any remaining errors rests with the authors. 2. The 2007-08 food price surge has increased the number of people living in extreme poverty, by 130-150m (World Bank 2009, p.96). 3. The FAO (2009a, p.29) notes that in spite of enormous increases in prices, developing countries increased their cereal production by less than 1% in 2008 and production actually decreased in the vast majority of them, leading the FAO to conclude that “the hoped-for supply response simply failed to materialize”. 4. A related but more technical reason is that households in advanced economies tend to consume a greater share of processed and manufactured food than their counterparts in developing economies. A surge in raw agricultural prices tends to have a smaller and less direct transmission through to retail prices of manufactured food than non-processed food since the service costs of wages, energy, transport and storage can often be greater than that of the raw commodity. 5. For those advanced countries that are large agricultural producers and net food exporters – for example New Zealand, Norway, Denmark and Australia – the central banks may be more impelled to raise rates because the positive income shock from a rising terms of trade should eventually feed through into stronger aggregate demand, although currency appreciation could be a mitigating factor.
1027-1075 FSA-Fiducie-1106-04.indd 25
12-07-11 10:23
Monetary policy Central banks tend to respond to core, not food inflation...
Historically, central banks have been slow to respond to surges in food and other commodity prices, preferring to take a “wait and see” approach, especially given that, historically, commodity price rises have been more transitory than secular. For a central bank, the question of whether or not to respond by raising interest rates really depends on whether the initial rise in headline CPI inflation starts feeding into non-food core CPI inflation, fuelled by rising inflation expectations and higher wage demands. For advanced economies, given that food has a relatively low weighting in the CPI basket, the rise in headline CPI inflation should be relatively mild. This limits the risk of second-round inflationary effects, and so central banks are typically not in a hurry to raise rates on the basis of 5 a rise in food prices. For instance, during the 2007-08 period the US Federal Reserve was cutting rates because of a deteriorating growth outlook. The European Central Bank hesitated for months to react to the rise in headline inflation, finally hiking rates by only 25bp in July 2008, before cutting them aggressively after the collapse of Lehman Brothers.
... and so are slow to respond
For developing economies, a food price surge should have a much larger impact on headline CPI inflation and consequently carries with it a greater risk of feeding through to core inflation; it also hurts GDP growth more than in advanced countries. Given this inflation/growth trade-off and given that central banks in developing economies generally having less monetary policy independence than their counterparts in advanced economies, they too are more likely to err on the side of tightening too little rather than too much. That was the experience in emerging Asia in 2007-08: central banks hiked rates only at the tail end of the food price surge and by much less than the rise in CPI inflation (Figure 24).
GDP growth by worsening the trade balance
Figure 24. Asian policy interest rates, headline CPI inflation and the food price index 1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
3.33 7.50 9.00 4.50
3.33 7.75
3.33 7.75 8.25 5.00
3.33 7.75 8.00 5.00
4.14
4.14 8.50 8.50
4.14 9.00 9.25 5.25
Policy rates (% p.a.) China India Indonesia The coming food price surge Korea
8.50 4.50
7.75 8.00 5.00
5.00
Malaysia 3.50 3.50 3.50 3.50 3.50 3.50 3.50 5 5.25 Philippines 7.50 producers 7.50and net food 6.00exporters 5.25 For those advanced countries that are large agricultural – for example5.00 New Zealand, Norway, 6.00 3.13 3.25 3.50shock from 3.50 3.50 Denmark and Australia – theTaiwan central banks may be2.88 more impelled to raise rates because the3.38 positive income a rising terms of trade should eventually feedThailand through into stronger aggregate demand, currency appreciation could 4.50 3.50 although 3.25 3.25 3.25be a mitigating 3.25 factor. 3.75 CPI inflation (% y-o-y) Nomura Global EconomicsChina and Strategy India Indonesia Korea Malaysia Philippines Taiwan Thailand Food price index
26
2.7 6.5 6.4 2.0 2.6 2.9 1.0 2.5 135
3.6 5.4 6.0 2.5 1.5 2.4 0.3 1.9 149
6.1 4.1 6.5 2.3 1.8 2.5 1.5 1.7 170
26.6 3.4 6.7 3.4 2.2 3.3 4.5 2.9 185
8.0 5.7 6.5 3.8 2.6 5.5 3.6 5.0 211
7.8 5.3 8 September 2010 9.6 12.5 9.0 12.0 4.9 5.5 4.9 8.4 9.8 12.2 4.2 4.5 7.5 7.3 214 185
Note: Figures in bold highlight interest rate hikes. Sources: CEIC, FAO and Nomura Global Economics.
The differential impact on long-term government between advancedduring economies and counterparts in advanced economies, they too are bond thanyields in advanced economies a sustained
developing ones is also likely to be significant. This is because developing economies, more likely to err on the side of tightening too little food price surge. particularly those that are large net importers of food, should see the sharpest rise in CPI rather than tooamuch. That was theposition experience in powerful influences that should drive bond yields inflation and worsening fiscal – two higher, particularly in developing central banks and governments have less emerging Asia in 2007-08: central bankscountries hiked rateswhereGrowth 8 September 2010 policy credibility. The upshot is that the yield curves in developing economies are likely to only at the tail end of the food price surge and by Higher food prices a relative price change steepen by more than in advanced economies during a sustained food mean price surge.
much less than the rise in CPI inflation (Figure 24).
Growth The differential impact on long-term government
that can have significant income redistribution
effects within an economy. Most notably they can lift incomes of rural households that produce surplus
Growth impact differs bond yields advanced economies and agricultural output, but forincome urban households and Higher food between prices mean a relative price change that can have significant redistribution between poor and effects within an economy. Most notably they can lift incomes of rural households that produce developing ones is also likely to be significant. This rural households that do not produce food, higher rich countries
surplus agricultural output, but for urban households and rural households that do not produce food costs reduces the wallet size for spending food, higher food costs reduces the wallet size for spending on other goods and services, 6 that are large in netpoor importers of food, should see the on other goods in poor However, the overall impact on and GDPservices, growthparticularly will vary across particularly households. countries, classify into four broad categories. sharpest risewhich in CPIwe inflation and a worsening fiscal households.6 However, the overall impact on GDP
is because developing economies, particularly those
position – two powerfulimpact: influencesLow thatincome should drive growth across which we classify 1. High negative countries that will arevary large net countries, importers of food. For countries such as Nigeria, Egypt and Pakistaninto a surge in food prices is a double whammy, bond yields four broad categories.
affecting GDP growth by worsening the trade balance and hurting household consumption. Food price inflation is highly negative on the purchasing power of incomes of low-income higher,households, particularly inasdeveloping High negative impact:isLow incomefor countries an evencountries higher where share of 1. their limited income required food consumption. The World Bank (2009, p.11) estimates that nearly two-thirds of total income central banks and governments have less policy that are large net importers of food. For is spent on food in the poor urban population of the developing world. High food prices credibility. The upshot is that the yield curves in countries such as Nigeria, Egypt and Pakistan a reduce the ability to meet even basic needs and can lead to increased poverty and become developing economies are likely to steepenriots by more in foodas prices is a double a potential source of protests, and politicalsurge tension, witnessed inwhammy, Mexico,affecting India, 7 Burkina Faso and Pakistan in 2008. More recently, food riots have erupted in Mozambique over higher bread prices. 2.
Medium negative impact: Low income countries that are net exporters of food. Countries such as Ukraine, Vietnam and Indonesia are low-income but are relatively large agricultural producers and net exporters of food. The positive terms of trade effect from a surge in food prices should boost wages, jobs and, over time, investment in the agricultural sector, leading to positive second-round effects on the broader economy, helping to cushion the negative impact on urban household consumption.
1027-1075 FSA-Fiducie-1106-04.indd 26
and hurting household consumption. Food price inflation is highly negative on the purchasing power of incomes of low-income households, as an even higher share of their limited income is required for food consumption. The World Bank (2009, p.11) estimates that nearly two-thirds of total income is spent on food in the poor urban population of the developing world. High food prices reduce the ability to meet even basic needs and can lead to increased poverty and become a potential source of protests, riots and political tension, as witnessed in Mexico, India, Burkina Faso and Pakistan in 2008.7 More recently, food riots have erupted in Mozambique over higher bread prices. 2. Medium negative impact: Low income countries that are net exporters of food. Countries such as Ukraine, Vietnam and Indonesia are low-income but are relatively large agricultural producers and net exporters of food. The positive terms of trade effect from a surge in food prices should boost wages, jobs and, over time, investment in the agricultural sector, leading to positive second-round effects on the broader economy, helping to cushion the negative impact on urban household consumption. 3. Low negative impact: High income countries that are net importers of food. Countries such as Luxembourg and Singapore have high GDP per capita of over USD30,000 but import virtually all of their food. A surge in food prices leads to a worsening trade balance, but the negative impact on household consumption is mild, given that food accounts for only a small share of the consumption basket.
12-07-11 10:23
“Tell me what you eat, and I will tell you what you are” 4. Positive impact: High income countries that
p. 97) estimates that the 2007-08 food price surge
are net exporters of food (Figure 23). Countries
increased fiscal outlays by more than 2% of GDP in
such as New Zealand, Uruguay, Argentina and
many countries.9
Denmark can actually benefit from a surge in food prices as the positive terms of trade effect
Exchange rates
more than offsets the mild negative impact on
In theory, holding everything else constant, a surge
household consumption.
in food prices should cause currencies of countries that are large net importers of food to depreciate
Fiscal finances
and currencies of large net exporters to appreciate
Given that a surge in food prices hurts low-income
(Figure 26) – but as is often the case with exchange
households the most, it is common for governments
rates, the relationship is less clear in practice. The
to intervene, particularly in developing economies.
case for currency depreciation is strengthened if, in
During the 2007-08 rise in food prices virtually
addition to being a net food importer, the country
all governments in Asia resorted to some form of
has a low GDP per capita, for two reasons. First, the
intervention in an attempt to safeguard low-income
poorer the country, the more likely the government
households’ ability to afford food (Figure 25). The
will intervene by lowering tariffs on food imports
FAO (2009a, p.41) conducted a more exhaustive
and restricting or banning food exports. This helps
global survey in May 2008 of policy responses in
to increase the domestic supply of food, but also
77 countries which revealed the following: price
exacerbates the deterioration in the merchandise
controls or consumer subsidies in 55% of the 77
trade balance. Second, the poorer the country the
countries; a reduction in, or the elimination of,
more likely a food price surge could worsen its
cereal import duties in about half of the countries;
economic fundamentals through weaker growth,
some form of export restrictions in 25% of the
higher inflation and worsening fiscal finances
countries; and roughly the same proportion took
which, in turn, could dampen investor confidence
measures to increase supply by drawing from official
and discourage capital inflows. On the other hand,
stockpiles. On the other hand, only 16% of the
the case for currency appreciation is strongest
countries surveyed implemented no policy responses
for high-income countries that are net food
whatsoever. While these measures can help ease the
exporters, but given that this can weaken the export
burden on the private sector, the quid pro quo is a
competitiveness of non-food sectors of the economy
deteriorating fiscal balance. The World Bank (2009,
– the so-called Dutch disease – policymakers may
8
27
6. For example, in India the poorest 20% of the population spends 62% of total income on food, compared with 36.4% for the richest 20% of the population, ADB (2008b, p.13). 7. Model simulations by the Asian Development Bank (2008b, pp14-15) estimate that in Pakistan a 30% increase in local food prices could push an additional 22m people into poverty. 8. Food price controls, consumer subsides and beggar-thy-neighbour trade protectionist policies such as cutting import tariffs and banning exports may seem a rational short-term policy response at the individual country level – particularly if there are riots in the streets – but by reducing the incentives for consumers to curtail demand and producers to increase supply these measures can actually worsen the supply-demand imbalance at the global level, thereby exacerbating the rise in food prices. 9. In Indonesia, the government almost tripled the size of its food subsidies in 2008 to IDR19.8trn, or 3% of total government spending, not to mention various other forms of support.
1027-1075 FSA-Fiducie-1106-04.indd 27
12-07-11 10:23
4.
Positive impact: High income countries that are net exporters of food (Figure 23). Countries such as New Zealand, Uruguay, Argentina and Denmark can actually benefit from a surge in food prices as the positive terms of trade effect more than offsets the mild negative impact on household consumption.
Fiscal finances Fiscal balances can deteriorate substantially
Given that a surge in food prices hurts low-income households the most, it is common for governments to intervene, particularly in developing economies. During the 2007-08 rise in food prices virtually all governments in Asia resorted to some form of intervention in an attempt to safeguard low-income households’ ability to afford food (Figure 25). The FAO (2009a, p.41) conducted a more exhaustive global survey in May 2008 of policy responses in 77 countries which revealed the following: price controls or consumer subsidies in 55% of the 77 countries; a reduction in, or the elimination of, cereal import duties in about half of the countries; some form of export restrictions in 25% of the countries; and roughly the same proportion took measures to 8 increase supply by drawing from official stockpiles. On the other hand, only 16% of the countries surveyed implemented no policy responses whatsoever. While these measures can help ease the burden on the private sector, the quid pro quo is a deteriorating fiscal balance. The World Bank (2009, p. 97) estimates that the 2007-08 food price surge increased fiscal outlays by more 9 than 2% of GDP in many countries.
Figure 25. Policy responses to the 2007-08 food price surge in developing Asian economies Increase Increase Reduce supply Build imports/ import using reserves/ relax duties reserves stockpiles restrictions
28
Afghanistan Bangladesh Cambodia China India Indonesia Kazakhstan Korea Kyrgyz Rep Malaysia Mongolia Myanmar Nepal Pakistan Philippines Singapore Sri Lanka Taiwan Tajikistan Thailand Vietnam
Price Raise controls/ export Export consumer duties restrictions subsidies
√
√ √ √ √
√ √ √
√ √
√
√
√ √
√
√ √
√ √ √ √ √
√ √
√
√ √ √ √ √ √ √ √ √ √
Min. support prices
8 September 2010
Action Min. Assistance/ Promote against/ export subsidy to self- appeals to Cash prices farmers sufficiency profiteers transfers
√ √
√
√
√
√ √
√
Food rations/ stamps
√ √ √ √
√ √
√ √
√ √ √ √ √ √ √
√ √ √ √
√ √
√
√
√
√
√ √
√
√
√
√ √
√
√ √
√
√ √
√ √
Source: Asian Development Bank and Nomura Global Economics. have an incentive to intervene inExchange the FX market to limit the currency appreciation.
(banking, microfinance, insurance) more accessible to rates farmers. The modernisation of agriculture is critical
are likely to be different in different countries. High income countries are relatively insulated from food
Currencies of lowIn theory, holding ineverything else constant, a surge in foodprice prices should cause currencies of the developing world, which according to many shocks, owing to the markedly lower share of income, net food countries that are large net importers of food to depreciate and currencies of large net exporters Supply response agricultural experts is long overdue. Yet bureaucracy, food in their CPI baskets and generally credible importing countries to appreciate (Figure 26) – but as is often the case with exchange rates, the relationship is less should depreciate Fiscal stimulus can help ease the burden on lowcorruption, political uncertainty and, until recently, central banks. As a result, policymakers tend to be
clear in practice. The case for currency depreciation is strengthened if, in addition to being a net a multi-decade decline in real food prices have been slow to respond in these countries, with any action food importer, the country has a low GDP per capita, for two reasons. First, the poorer the more permanent solution is to increase investment obstacles to a new wave of investment in developing depending tariffs mainly on on the risksimports of second-round country, the more likely the government will intervene by lowering food and in agriculture to lift productivity and output countries. beauty ofThis markethelps forces to is that there the effects on wages supply and inflation lowerrestricting or –banning foodThe exports. increase domestic of expectations. food, but In also indeed, rising food prices should increase thethe deterioration will always be a price thatmerchandise will encourage agricultural income, developing thecountry other hand, exacerbates in the trade balance. Second, thecountries pooreronthe income households from high food prices, but the
incentive to do so. The requisite measures include investment; the question is, how high that might be. where the share of food in the CPI basket is high 8 Food price controls, consumer subsides and beggar-thy-neighbour trade protectionist policies such as cutting banning increasing spending on agricultural R&D, transport, and central banksimport are less tariffs credibleand inflation fighters, exports may seem a rational short-term policy response at the individual country level – particularly if there are riots in the streets – but telecommunications, storage; investing more in rural Conclusion the impact of food price shocks tends to have by reducing the incentives for consumers to curtail demand and producers to increase supply these measures can actually worsen theadverse supply-demand imbalance at the global level, thereby exacerbating the rise in food prices. education and health; revamping land policies; In conclusion, our analysis suggests that both the consequences for inflation, growth and the overall 9 In Indonesia, the government almost tripled the size of its food subsidies in 2008 to IDR19.8trn, or 3% of total government spending, removing trade barriers and making financial standard of living. Policy response in developing not to mention various other forms of services support. effects of, and policy responses to, food price inflation
Nomura Global Economics and Strategy
1027-1075 FSA-Fiducie-1106-04.indd 28
4
8 September 2010
12-07-11 10:23
ming food price surge
the more likely a food price surge could worsen its economic fundamentals through weaker “In lower-income countries the which, impact food price growth, higher inflation and worsening fiscal finances in turn,of could dampen investor confidence and discourage capital inflows. On the other hand, the case for currency appreciation shocks to countries have that adverse forcan weaken is strongest tends for high-income are net foodconsequences exporters, but given that this the export competitiveness of non-food sectors of the economy – the so-called Dutch disease – inflation, growth and the overall of living“ policymakers may have an incentive to intervene in thestandard FX market to limit the currency appreciation. Figure 26. The World’s top 10 food net exporting and importing countries in 2008 Top 10 net food exporters Country
Net food exports (% of GDP)
New Zealand Uruguay Argentina Costa Rica Chile Malaysia Thailand Ecuador Denmark Brazil
7.5 5.6 5.6 4.7 3.1 2.9 2.7 2.5 1.8 1.8
Rank 1 2 3 4 5 6 7 8 9 10
Top 10 net food importers Rank
Country
1 2 3 4 5 6 7 8 9 10
Net food imports (% of GDP)
Hong Kong Lebanon Bangladesh Algeria Sri Lanka Egypt Morocco Saudi Arabia 8 September 2010 Portugal Libya
-4.4 -3.9 -3.3 -2.8 -2.7 -2.1 -2.1 -1.8 -1.8 -1.7
Source: FAO, CEIC and Nomura Global Economics.
economies usually involves fiscal measures, like the
Supply response
ng-term n is more ment in ture
reduction of import duties or placing restrictions in
Fiscal stimulus can help ease the burden on low-income households from high food prices, but food exports.
the more permanent solution is to increase investment in agriculture to lift productivity and output – indeed, rising food prices should increase the incentive to do so. The requisite measures spending on agricultural R&D, transport, telecommunications, While fiscal include stimulusincreasing can help ease the burden storage; investing more in rural education and health; revamping land policies; removing trade on low-income households from food inflation, barriers and making financial services (banking, microfinance, insurance) more accessible to however, remains a short-term measure.is Acritical in the developing world, which according to farmers. itThe modernisation of agriculture many agricultural experts is long overdue. more permanent solution requires investmentYet in bureaucracy, corruption, political uncertainty and, until recently, a multi-decade decline in real food prices have been obstacles to a new wave of agriculture in order to increase productivity and investment in developing countries. The beauty of market forces is that there will always be a output. Rising food prices agricultural certainly increase the the question is, how high that might be. price that will encourage investment;
29
incentive for this to happen; the actual price level that will make the requisite investments a reality,
Conclusion
however, remains the key unknown.
In conclusion, our analysis suggests that both the effects of, and policy responses to, food price inflation are likely to be different in different countries. High income countries are relatively insulated from food price owing to the markedly lower share of food in their CPI baskets For reactions, please mailshocks, to fiducie @fsa.nl and generally credible central banks. As a result, policymakers tend to be slow to respond in these countries, with any action depending mainly on the risks of second-round effects on wages and inflation expectations. In lower-income, developing countries on the other hand, where the share of is food in the financial CPI basket is high andand central banks are less credibleinvestment inflation fighters, the Nomura a leading services group the pre-eminent independent bank with impact of food price shocks tends to have adverse consequences for inflation, growth and the worldwide reach. Based in Tokyo andresponse with regional headquarterseconomies in London, usually Hong Kong and New overall standard of living. Policy in developing involves fiscal measures, likeoffices the reduction ofcountries import duties or placing in people food exports. York, we have in over 30 and employ morerestrictions than 26,000 worldwide. In October
2008 we acquired the Lehman franchise Asia and the equities and investment banking While fiscal stimulus can helpBrothers ease the burdeninon low-income households from food inflation, however, a short-term A more solutiondeal requires in businesses itinremains Europe and the Middlemeasure. East. Following thispermanent transformational and ourinvestment recent agriculture in order to increase productivity and output. Rising food prices certainly increase the successes Nomura is now the new force in global investment banking. Our office based in Amsterdam incentive for this to happen; the actual price level that will make the requisite investments a covers the Beneluxremains region and strong track record of serving large institutional investors, the reality, however, the has keyaunknown. Dutch and Belgian State and large corporate institutions in all industries.
Global Economics and Strategy
1027-1075 FSA-Fiducie-1106-04.indd 29
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8 September 2010
12-07-11 10:23
Duisenberg school of finance - ask an expert rising commodity Prices Prof. Dr. Werker
Bas Werker is a Professor of Econometrics and Finance at Duisenberg school of finance and Tilburg University. In the past, Bas Werker has been affiliated with the Université de Sciences Sociales in Toulouse and, from 1997-2000, the Université Libre de Bruxelles. He is a Board Member of the Tilburg Center of Finance, research fellow of Netspar, and Chairman of the Department of Econometrics and Operations Research at Tilburg University. Bas Werker is a Senior Research Fellow at Duisenberg school of finance.
30
To what extent are rising commodity prices cyclical
How do increases in prices relate to changes in
and are current trends likely to be persistent?
political and economic power between countries
One thing we learn in economics is that trends
and regions?
are never persistent, but, indeed, cyclical patterns
Power and money have always been related in history
can sometimes be slowly moving and thus appear
and there is no reason to expect this to change. As
to form a trend. Due to the low price elasticity
many commodities are provided by countries in less
for most commodities, in particular think about
stable political regions, I think that governments of
energy, there is no reason to expect a lower demand
mainly commodity consuming countries, like the
in the short run. At the same time, technological
Netherlands, will likely try to be more self-providing,
innovations reducing commodity demands will arise,
diversify suppliers, and look for alternatives for
but generally this takes a few years to be operational.
certain commodities. Although costly in terms of
On the supply side, extra production capacity will
efficiency, it will make the world less exposed to
become available but with a similar delay. I do
aggregate shocks. Efficiency and robustness also
not believe in point-estimates, so my prediction:
here are opposing forces. Thus, in my view, the price
80% probability of further increases and 20% of
changes will lead to political and economic power
decreasing commodity prices.
changes much more than in the reverse direction.
Can increased commodity prices lead to a
How do rising commodity prices affect the
slowdown in economic recovery?
purchasing power of consumers and what are the
A slowdown with respect to what? Current growth
relative wealth effects?
numbers? The average growth over the past 10 years,
Obviously, purchasing power will go down due to
over the past century? And it also depends on how
the rising prices. In relative terms there will likely be
you want to measure growth: in nominal terms, real
a transfer of wealth from richer to poorer countries as
terms, utility terms? The rising commodity prices are
the latter are usually more commodity producing. It
probably also a sign of economic recovery and so the
will be important, from a sustainability point of view,
causality relation is not clear. In general I would say
that the revenues of the higher commodity prices
that rising commodity prices (certainly in real terms)
will also lead to increased wealth for the people in
are a sign of increasing global wealth and a sign of
the countries involved. Wealth imbalances may thus
economic growth. Thus, I would put the causality in
decrease, which I think would be good.
the reverse order.
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To what extent will strategies of firms change
What industries are likely to have increased
and/or adapt as a result of increased prices in
returns as a consequence of the trends in
commodities?
commodity prices?
Obviously we need to distinguish commodity
Known trends are already accounted for in current
producing firms from commodity consuming firms.
prices and thus will not lead to any increased future
For the first category, more profit will lead to more
(expected) returns. You may expect higher returns
investments in their production facilities. Also, more
(and risk) only if commodities will play a larger
R&D efforts will explore commodity production
systematic role in the future economy. In that
facilities that up to now were not profitable. It’s not
case, both commodity producing and commodity
clear what the environmental effects of this will be,
consuming industries will be more exposed to
but that probably has to be looked at carefully. On
systematic risk, earn the associated risk premium,
the other hand, for the commodity consuming firms,
and suffer from the associated risk. More demand
they will try to diversify suppliers and thus become
for commodities can be expected to lead to a higher
less dependent on single-country providers. These
weight for these firms in the overall market portfolio
firms will also try and adopt production schemes
and thus, think of the Capital Asset Pricing Model,
to make them more commodity efficient. This will
higher expected returns (and, once more, risk!).
have positive environmental effects. Finally, the higher prices will certainly lead to higher consumer prices and thus (in relative terms) lower prices for service goods.
For reactions, please mail to [email protected]
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