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SEB – Jordbruksprodukter, vecka 5 2012

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SEB Veckobrev Jordbruksprodukter - AnalysVinnare sedan föregående vecka har de olika veteterminerna varit med uppgångar på 4 till 5%. Eurex-terminerna på tyska grisar ligger 10% högre den här veckan, men det beror bara på att vi nu tittar på ett längre terminskontrakt än förra veckan. Det är dock en liten prisuppgång på gris i Europa och också en liten i USA.

I fokus för vetemarknaden har oron för ryskt exportstopp varit. Marknaden har också oroat sig för det kalla och torra vädret i Ryssland.

Oron för torkan i Argentina har lagt sig och när nederbörden kommit tillbaka anses majsskörden kunna stabilisera sig på 18 – 22 mt (USDA:s senaste WASDE låg på 23 mt). WASDE släpps nästa vecka.

Vete

Oro över det kalla vädret i Ryssland och Östeuropa samt ett eventuellt införande av ett ryskt exportförbud har fortsatt att driva vete priset uppåt.

Den ryska regeringen diskuterar frågan om att eventuellt införande av skatter / tullar på spannmålsexporten för att bromsa den höga exporttakten.

Jordbruksministeriet i Ryssland övervakar dock kontinuerligt volymen som exporteras, och som fortfarande är stabil, och kommer att basera sitt beslut på den volym som har exporterats per februari månad. I mitten av februari kommer regeringen att kunna estimera volymen för hela månaden och då ta ställning i frågan.

SEB - Tendens / Prognos den 2 februari 2012Samtidigt betonar ministeriet att detta inte kan komma som någon överraskning för marknaden och att informationen som har cirkulerat om att skatter / tullar ska införas per april 2012 är ”helt grundlösa”. Som vi har skrivit om tidigare var Putin ute redan i oktober och pratade om att spannmålsexporten för 2011/12 skulle komma att uppgå till 24-25 miljoner ton och därefter skulle eventuella restriktioner införas för att inte ”landet skulle bli utan bröd och för att upprätthålla lager”.

Rosstat’s statistik visar att produktionen av spannmål och baljväxter i Ryssland under 2011 uppgår till 93.9 miljoner ton, inklusive 56,2 miljoner ton vete, 16,9 miljoner korn, 6,7 miljoner ton majs och 14,1 milj i andra sädesslag och baljväxter. Detta är en uppgång med 54 procent sedan 2010 då landet led av svår torka. Veteproduktionen är upp 36% och produktionen av korn har mer än fördubblats. Det är dock bara 3 procent högre än det 5-åriga genomsnittet. Majsproduktionen matchar rekordåret 2008. Den enorma ökningen är nästan helt och hållet avkastningsrelaterad, då odlad areal endast ökade med 1 procent från 2010 till 43,6 miljoner hektar.

Som ett resultat av den stora spannmålsskörden ökade också exporten av spannmål kraftigt under första halvan av året (juli – december 2011) där Ryssland exporterade över 18 miljoner ton spannmål och baljväxter, inklusive 14,8 miljoner ton vete och det var tre av Rysslands södra regioner (Rostov oblast, Krasnodar och Stavropol krays) som stod för 85 procent av och den totala exporten. Den totala exporten för 2011/12 väntas nå 24 miljoner ton. Trots de höga exportsiffrorna under det första halvåret kommer det att bli en betydlig nedgång i exporttakten under den andra halvan av 2011/12 (januari – juni). Dels är exportpotentialen från de tre södra regionerna i stort sett klar och kommer därmed att vara nästan obefintlig de sista månaderna, dels är det problem med logistiken under vinterhalvåret. Den inhemska efterfrågan på spannmål till foderindustrin är också fortsatt stark och lagren av spannmål för export har minskat.

Vädret har också ställt till det i Ukraina då svårt frost i de flesta ukrainska regioner dramatiskt har bromsat takten på landets spannmålsexport.

En temperatur på runt minus 20 grader gör det i stort sett omöjligt att lasta spannmål på järnvägsvagnar inne i landet medan stark vind och snö hindrar lastningen i hamnarna och flera stora fartyg ligger bara och väntar.

Nedan ser vi kursdiagrammet för marskontraktet på Matif, där priset rusat över motståndet på 217, men faktiskt gick ner på onsdagskvällen och stängde under. Det är en negativ signal.

Vete - Diagram över analys den 1 februari 2012

Nedan ser vi novemberkontraktet, som inte bröt ur sin konsolidering i tisdags morse, men som ännu inte nått motståndsnivån på 205 euro.

Vete - Diagram och grafer den 1 februari 2012

Matif har gått ännu mer i backwardation och contangot har minskat för Chicagovetet. Det talas om att den europeiske bonden inte säljer något, utan sitter och håller på sin spannmål. Vi tänker, det kan bli trångt i dörren framåt våren, när alla vill sälja samtidigt.

Vete - Diagram och grafer den 1 februari 2012

Vi tror att vi såg en ”key reversal day” igår i och med att marskontraktet tvärvände under dagen och stängde på den lägsta nivån. Ett sådant omslag från uppgång till tvär nedgång brukar vara värt att ta fasta på.

Maltkorn

Maltkornet har handlats upp eftersom vetet handlats upp. Det finns inget specifikt att säga om maltkornet.

Maltkorn - Diagram över pris den 1 februari 2012

Potatis

Priset på industripotatis ligger kvar på samma nivå som förra veckan för skörd 2012.

Potatis (euro potato) - Prisdiagram den 1 februari 2012

Nedan ser vi terminskurvan framåt i tiden. Årets låga priser väntas alltså inte bestå.

Potatis (euro potato) - Terminskurva den 1 februari 2012

Majs

Väntad skörd i Argentina håller på att stabilisera sig på 18-21 mt, som är lägre än vad USDA förutspådde i januari-WASDE. Nedan ser vi att priset på decemberkontraktet ligger precis under en motståndslinje. Brott upp genom den är ett tecken på styrka och att vi i så fall skulle kunna få se en fortsatt prisuppgång.

Majs - Corn future - Prisdiagram den 1 februari 2012

Nedan ser vi terminskurvorna för vete (contango) och majs (backwardation).

Terminskurvorna för vete (contango) och majs (backwardation) - 1 februari 2012

Vete är 60 punds bushel, men här har jag räknat om priserna så att de båda är uttryckta som majsens 56 punds bushels.

Sojabönor

Sodrugestvo och Grain Ukraine förutspår en rekordskörd av sojabönor i Ukraina under 2012/13. Lönsamheten är 100-150% på grödan. Bara solrosor och majs har högre lönsamhet. Det finns gott om utsäde. Förfruktsfördelarna har ett högt värde för korn och vete. Tekniskt ser finns ingen signal ännu.

Sojabönor (soybean) - Prisdiagram för terminer den 1 februari 2012

Raps

Novemberkontraktet har brutit motståndet, men ännu inte gått över pristoppen i juli. Så länge det inte sker, har vi inte någon stor trendvändning.

Raps (rapeseed) - Tekniskt pris den 1 februari 2012

Mjölk

Nedan ser vi priset på marskontraktet på flytande mjölk (kontakt avräknat mot USDA:s prisindex). Vi tror fortfarande att priset kan gå ner till 16 och att prisnedgången är ”halvvägs”.

Mjölk - Milk future - Terminspriser den 1 februari 2012

Gris

Priset på lean hogs har brutit uppåt, och befinner sig därmed fortfarande i det breda intervall som priset pendlat inom det senaste året.

Gris (lean hogs) - Prisprognos den 1 februari 2012

Priset i Europa har betett sig på samma sätt. Nedan ser vi det vid var tid kortaste terminskontraktet (närmast spot). Det ser ut som om priset stigit kraftigt, men det beror bara på att det kontrakt som var kortast tidigare förfallit och att det kortaste nu, ligger på en högre nivå pga säsongseffekten.

Lean hogs future - Grafer den 1 februari 2012Lean hogs (gris) - Terminskurvor den 1 februari 2012

Valutor

EURSEK – försöker korrigera nedgången. Vi har en neutral rekommendation på både en veckas sikt och tre månaders.

EURSEK - Pris diagram den 1 februari 2012

EURUSD – i rekyl fortfarande Rekommendation: Neutral på en veckas sikt. Negativ på tre månader.

EURUSD - Prisdiagram den 1 februari 2012

USDSEK – söker efter en botten i korrektionen nedåt Vi har en neutral rekommendation på en veckas sikt, men är positive på tre månader.

USDSEK - Valuta - Prisdiagram den 1 februari 2012

[box]SEB Veckobrev Jordbruksprodukter är producerat av SEB Merchant Banking och publiceras i samarbete och med tillstånd på Råvarumarknaden.se[/box]

Disclaimer

The information in this document has been compiled by SEB Merchant Banking, a division within Skandinaviska Enskilda Banken AB (publ) (“SEB”).

Opinions contained in this report represent the bank’s present opinion only and are subject to change without notice. All information contained in this report has been compiled in good faith from sources believed to be reliable. However, no representation or warranty, expressed or implied, is made with respect to the completeness or accuracy of its contents and the information is not to be relied upon as authoritative. Anyone considering taking actions based upon the content of this document is urged to base his or her investment decisions upon such investigations as he or she deems necessary. This document is being provided as information only, and no specific actions are being solicited as a result of it; to the extent permitted by law, no liability whatsoever is accepted for any direct or consequential loss arising from use of this document or its contents.

About SEB

SEB is a public company incorporated in Stockholm, Sweden, with limited liability. It is a participant at major Nordic and other European Regulated Markets and Multilateral Trading Facilities (as well as some non-European equivalent markets) for trading in financial instruments, such as markets operated by NASDAQ OMX, NYSE Euronext, London Stock Exchange, Deutsche Börse, Swiss Exchanges, Turquoise and Chi-X. SEB is authorized and regulated by Finansinspektionen in Sweden; it is authorized and subject to limited regulation by the Financial Services Authority for the conduct of designated investment business in the UK, and is subject to the provisions of relevant regulators in all other jurisdictions where SEB conducts operations. SEB Merchant Banking. All rights reserved.

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Analys

Metals price forecast: Lower Before Higher

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SEB - analysbrev på råvaror

Lower before higher

SEB - Prognoser på råvaror - Commodity

The world is slowing down along with fiscal and monetary tightening. The rapid rise in interest rates this year will work with a lag so the slowdown in the real economy is likely to continue. We expect metals prices to ease along with that. The continued deterioration in the Chinese property market is likely structural with growth shifting towards higher value sectors including green energy and EVs. Chinese credit expansion has started. Stronger demand for metals like copper, nickel and aluminium is likely to emerge in H2-23. Strong prices for metals over the coming decade due to sub-par capex spending over the past decade is likely.

Bjarne Schieldrop, Chief analyst commodities at SEB
Bjarne Schieldrop, Chief analyst commodities, SEB

Weakening macro and weakening demand. The world is now in the grip of a tightening craze amid inflation panic which was the result of the stimulus boom ignited by Covid-19 panic. The US expanded its M2 monetary base by 30% of GDP during the stimulus boom. Donald Trump earlier clamped down on immigration from Mexico/Latin America. Rampant consumer spending on capital goods together with an ultra-tight labor market then led to intense inflation pressure in the US. But also, in many other countries which also stimulated too much. The US is ahead of the curve with respect to interest rate hikes. The USD has rallied, forcing many central banks around the world to lift rates to defend their currencies as well as fighting their own inflationary pressures. The Japanese central bank has refrained from doing so and has instead intervened in the yen currency market for the first time since 1998. The year 2022 will likely be the worst selloff in global government bonds since 1949 as interest rates rise rapidly from very low levels. This is taking place following a decade where the world has been gorging on ultra-cheap debt. There is clearly a risk that something will break apart somewhere in the financial system as the world gallops through this extreme roller coaster ride of stimulus and tightening. On top of this we have and energy crisis in Europe where natural gas prices for year 2023 currently is priced at 700% of normal levels. War in Ukraine, risk for the use of nuclear weapons, an enduring cool-down of the Chinese property market and continued lock-downs in China due to Covid-19 is adding plenty of uncertain elements.

Downside price risks for metals over the coming 6-9 months. The significant rise in rates around the world will work with a lag. There can be up to a 12-month lag from rates starts to rise to when they take real effect. Continued economic cool-down in the economy is thus likely. Chinese politicians seem unlikely to run yet another round of property market-based stimulus. As such there are clearly downside risks to global economic growth and industrial metals prices over the coming 6 months.

China may be a “White Swan Event” in H2-23 onward. LME’s China seminar in London on Monday 24 October this year was very interesting. The brightest spot in our view was Jinny Yang, the Chief China economist at ICBC Standard Bank. She stated that China may turn out to be a “white swan event” in H2-2023. Further that the Chinese economy now is on a decade long type of transition period. Away from property focused growth. With a shift instead to technology and innovation, telecoms and energy transition, consumer demand side economy and higher value and more advanced sectors. The property market will be a fading sector with respect to growth. Chinese politicians are fully committed to the energy transition. No slowdown in there. Credit expansion has already started. The real effect of that will emerge in H2-23. The new growth focus will be different from before. But it will still imply lots of metals like aluminium, copper, nickel, zinc, cobalt, manganese, and other special metals. There will be less copper for pipes and wiring for housing but there will be more copper for EVs, Solar power, Wind power and power networks etc.

Copper: Struggling supply from Chile, rising supply from Africa while Russian exports keeps flowing to market. The Chinese housing market normally accounts for 20% of global copper demand. So, slowing Chinese housing market is bad for copper. Russian exports keep flowing to SE Asia where it is re-exported. Good supply growth is expected from Africa in 2023. Supply from Chile is struggling with falling ore grades, political headwinds, and mining strikes. Demand is projected to boom over the coming decades while investments in new mines have been sub-par over the past decade. So strong prices in the medium to longer term. But in the short-term the negative demand forces will likely have the upper hand.

Nickel: Tight high-quality nickel market but surplus for low-quality nickel. There is currently a plentiful supply of low-grade nickel with weak stainless-steel demand and strong demand for high quality nickel for EV batteries. The result is a current USD 5-6000/ton price premium for high-quality vs. low-quality nickel. High-quality LME grade nickel now only accounts for 25% of the global nickel market. Over the coming decade there will be strong demand growth for high-quality nickel for EV batteries, but high-quality NiSO4 will take center stage. The price of high-quality nickel over the coming decade will depend on how quickly the world can ramp up low-grade to high-grade conversion capacity.

Aluminium: Russian production and exports keeps flowing at normal pace to the market through different routes. Supply from the western world set to expand by 1.3 m ton pa in 2023, the biggest expansion in a decade. Demand is projected to grow strongly over the decade to come with energy transition and EVs being strong sources of demand. Western premiums likely to stay elevated versus Asian premiums to attract metal. Increasing focus on low carbon aluminium. But weakness before strength.

SEB commodities price forecast:

SEB commodities price forecast

Chinese credit cycle vs industrial metals. Chinese credit expansion has already started.

Chinese credit cycle vs industrial metals
Source: SEB calculations, data from Blberg

This report has been compiled by SEB´s Commodity Research, a division within Skandinaviska Enskilda Banken AB (publ) (”SEB”), to provide background information only.

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Analys

Europe’s energy policy unravels a potential advantage for US energy over Europe

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WisdomTree
WidsomTree

The clock is ticking for Europe to shield its economy amidst the current energy crisis. The cost of electricity across the European bloc is nearly 10 times the 10-year average in response to Russia cutting back natural gas supplies in retaliation to sanctions. There has been a substantial increase in the share of supply of Liquidifies Natural Gas (LNG) and alternative suppliers as a direct replacement of waning Russian gas supply.

Figure 1: Natural gas flows in the European market, first half 2022 versus first half 2021

Karta hur importen av naturgas till Europa har förändrats
Source: Bruegel, WisdomTree as of 6 September 2022. Please note: Arrows width indicates size of 2022 flow.

European leaders are racing to come up with a plan on energy intervention in the power markets. One of the measures being touted is imposing an energy windfall tax on oil and gas profits to help households and businesses survive this upcoming winter season. The plan is to re-channel these unexpected profits from the energy sector to help domestic consumers and companies pay these high bills. The windfall tax on the oil and gas companies should be treated as a “solidarity contribution,” according to European Commission (EC) President, Ursula von der Leyen.

Imposing a windfall tax on those profiting from the war

A windfall tax would impose a levy on the revenues generated by non-gas producing companies when market prices exceed €200 per megawatt hour (Mwh) and redistribute excess revenues to vulnerable companies and households. There has been greater consensus among other European Union (EU) countries on the windfall tax compared to other parts of the European Commission’s 5-point plan. This includes – setting a price cap on Russian gas, a mandatory reduction in peak electricity demand, funding for ailing utility companies, a windfall tax on fossil fuel companies and changes to collateral requirements for electricity companies. The EC’s plan will need to meet the approval of the bloc before being enforced. The most controversial issue remains the Russian price cap – aimed at penalising Russia for weaponising energy.

Coordinated energy policy needed despite different energy mix across EU bloc

There are major differences between member states based on those that rely on coal, nuclear or renewable power owing to which imposing a one energy policy will be challenging. Austria, Hungary, and Slovakia, known to import large amounts of Russian gas are against the price cap on Russian gas. On the other hand, a number of  EU countries including France, Italy, and Poland, support a cap, but argue it should apply to all imported forms of the fuel, including LNG. Germany is undecided but fears the disagreements on the price caps risk spoiling EU unity. Spain, a big generator of wind and solar power was quick to draw criticism of the proposed €200/Mwh as it does not correspond to the real costs and fails to support electrification and the deployment of renewables.

In the US, various Senators including Senate Finance Chair Ron Wyden, have proposed legislation that would double the tax rate of large oil and gas companies excess profits. However, given the current political climate it seems increasingly unlikely that these proposals would gain any traction in Congress.

Europe’s energy policy likely to put a strain on capex in the near term

Since the oil price plunge from 2014 to 2016 alongside climate change awareness and Environmental Social and Governance (ESG) mandates, the energy sector saw a sharp decline in capital expenditure (capex). Since then, capex in the global energy sector has failed to attain the levels last seen at the peak in 2014. While capex trends in Europe’s energy sector had begun to outpace that of the US, driven mainly by a rise in the share of spending on clean energy, we believe the impending energy crisis and energy policy including the national windfall levies in Europe are likely to disincentivise capex in Europe compared to the US over the medium term. High prices are encouraging several countries to step up fossil fuel investment, as they seek to secure and diversify their sources of supply.

Source: Bloomberg, WisdomTree as of 31 August 2022.

The divergent energy policies and prevalent supply situations in the US and Europe opens up a potential opportunity in the energy sector. The energy sector has been the unique bright spot in global equity markets in 2022 posting the strongest earnings results in H1 2022. Despite its strong price performance, the US energy sector trades at a price to earnings (P/E) ratio of 8x and has a dividend yield of 3%. In September 2008, the energy sector had a 12.5% weight in the S&P 500 and was the fourth largest sector by market capitalisation in the world’s largest economy and equity market. Fast forward to today, the energy sector accounts for only 4% of the S&P 500 Index. While the future trajectory is greener, the world has come to terms with the fact that we will require oil and gas in the interim in order to fulfil our energy requirements. Investment is increasing in all parts of the energy sector, but the main boost in recent years has come from the power sector – mainly in renewables and grids – and from increased spending on end-use efficiency. As Europe plans to reduce its reliance on Russian energy supply, it will become more reliant on US LNG imports. This should fuel further investment in the US energy sector in the interim.

Aneeka Gupta, Director, Macroeconomic Research, WisdomTree

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Analys

Agricultural commodities could offer a hedge against inflation

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WisdomTree
WidsomTree

Agricultural commodity prices have been buoyed higher by rising grain and oilseed prices. At a time, when global equities have sold off by nearly 13.88% amidst soaring inflation and tightening liquidity conditions, agricultural commodities are up 26.8%. There are a plethora of supply side issues emanating from the war that are likely to continue to drive prices higher – the rise of protectionism, higher fertiliser costs, changing biofuel mandates and adverse weather conditions to name a few. The Russia-Ukraine war has had ripple effects from disrupting supply chains to raising fertiliser costs.

Rising protectionism buoys agricultural commodities higher

The war-related disruptions have also given rise to protectionism. To cite a few examples in 2022– India, the world’s third largest wheat producer, announced it would restrict wheat exports to manage domestic supplies of the grain, which led to a sharp rise in wheat prices. Indonesia also announced an export ban on palm oil on April 28, but the ban was lifted on May 19 after hundreds of farmers rallied to protest the move. In a tight oil-seeds markets, the initial announcement led soybean oil, an alternative to palm oil, sharply higher.

Source: WisdomTree as of 7 June 2022

Higher biofuel blending mandates to bolster demand for corn and soybean oil

Changes in the biofuel blending mandates are also poised to increase demand for agricultural commodities. The US is home to the world’s largest biofuel market. The Biden administration is ordering refiners to boost the use of biofuels such as corn-based ethanol. The US Environmental Protection Agency (EPA) is requiring refiners to mix 20.63 billion gallons of renewable fuels into gasoline and diesel this year, marking a 9.5% increase over last year’s target. This will put pressure on refiners to blend more biofuel into their gasoline production this year, resulting in a net positive impact on the biofuels industry. Grains such as corn stand to benefit owing to their high starch content and relatively easy conversion to ethanol. Amidst waning stockpiles of diesel, Brazil is also considering increasing the biodiesel blend to 15% from 10% (i.e. the amount of soybean oil blended into trucking fuel). This has the potential to bolster demand for soybeans at a time when soybeans are already in short supply due to droughts in South America and US plantings trail last year’s pace.

Rising fertiliser costs are weakening demand, in turn lowering yields

The Russia-Ukraine conflict has caused disruptions in fertiliser production and material price increases, which has put farmer margins and agricultural yields at risk elsewhere, driving the prices of most agricultural commodities higher. Russia and Ukraine account for a significant share of the global fertiliser trade. Russia produces 9% of global nitrogen fertiliser, 10% of global phosphate fertiliser, and 20% of global potash fertiliser. It exports more than two thirds of its production of each product. Belarus produces an additional 17% of global potash and exports most of it.

Owing to its high soil quality, Argentina tends to use less fertilisers, but Brazil (the world’s largest importer of fertilisers) of which 85% of its needs are imported, is likely to feel the impact more. Russia alone accounts for 25% of Brazil’s total fertiliser imports. Farmers can also plant more soybeans, which require less fertilisers than corn. The US and global corn balance are set to continue to tighten, which suggests that the current high price environment is set to linger. The high prices and low availability of fertilisers is making farmers reduce usage and is also resulting in lower fertiliser prices similar to the trend witnessed back in 2008.

Ammonia prices
Source: Bloomberg, WisdomTree as of 27 May 2022.

Speculative positioning garnering momentum among agricultural commodities 

According to data from the Commodity Futures Trading Commission (CFTC), net speculative positioning in agricultural commodities has risen considerably since the covid pandemic. Tighter supply coupled with stockpiling by national governments concerned about food security has led to a rise in agricultural commodity prices. Not only has net speculative positioning on agricultural commodities risen versus its own history but also in comparison to other commodity subsectors, as illustrated in the chart below:

Speculative positions
Source: WisdomTree, CFTC, Bloomberg as of 25 May 2022.

Adverse weather conditions impact agricultural commodities

El Niño and La Niña are the warm and cool phases of a recurring climate pattern across the tropical Pacific—the El Niño-Southern Oscillation, or “ENSO” for short. The pattern shifts back and forth irregularly every two to seven years, and each phase triggers predictable disruptions of temperature, precipitation. The current La Niña has been around since October 2021. It has been responsible for the South American droughts, milder weather in Southern parts of US and heavy rainfalls across the Pacific Northwest. There is a 51% chance La Niña could continue into the December to February period, with those odds down from last month’s forecast of 58% according to the US climate prediction centre. The waters across the equatorial Pacific Ocean are expected to stay cool or be close to normal between June and September, which means the influence on weather patterns won’t be enough to disrupt tropical storms and hurricanes in the Atlantic.  

Conclusion

Agricultural commodities have posted a strong performance in 2022. Yet there remain plenty of factors that could drive the performance of this commodity subsector even higher. Agricultural commodities are unique owing to their high dependence on weather conditions that make them volatile but also offer diversification benefits.

Aneeka Gupta, Director, Macroeconomic Research, WisdomTree

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