Acorn: Long Grains

Tongalese volcanoes, Solar minimums, Flash Frost Event risk, Gleissberg cycles and La Nada Modoki. Add a side order of geopolitics. No assurances, but 2023 could get interesting for grains.

Thursday 24th February 2023

Summary

• A number of coincidental climate phenomena raise the odds of drought in key crop growing geographies around the planet.

• Geopolitics adds to this heady cocktail. War tragically rumbles on in Ukraine, China’s evolving diet exports food inflation to the world just as the pendulum shift from labor to capital puts food price inflation at the top of global political priorities.

• In 2023, an understanding of forces impacting agricultural commodities is no longer an ‘elective’ discipline even if you do not invest directly.

• Having said that, the could be some asymmetric investment opportunities in the grains space. An extreme event appears mispriced.

• Today, we added a position in a strip of call options (January 2024 expiry) in $DBA, Invesco’s DB Multi-Commodity Agriculture ETF.

Background

Let me start with a very important caveat. The 🐿️ is certainly not a climate change denier, neither is he a meteorologist or climate scientist. I am about to cite climate r…