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Will Turkey’s financial crisis spread?

TAGS: Outlook
Rice Markets
What are the market impacts of Turkey’s financial crisis?

Turkey is strategically important to the United States, U.S. European allies, and Middle East stability economically, politically, and militarily. Turkey commands a massive land route connecting Greece and Bulgaria to Syria, Iraq, Iran, Georgia, Azerbaijan and Armenia or Southern Europe to the Middle East.

Turkish President Recep Tayyip Erdogan’s dictatorial ambitions and failing economic leadership are worsening the country’s ongoing financial and currency crisis, not only economically collapsing the country, but potentially destabilizing other countries within the European and Middle East region.

Turkey has been a NATO ally since 1952, but pragmatically Europe’s economic future and NATO’s military future are highly uncertain and the capacity of the United States to police the region and maintain regional economic stability has its limits.

Consequently, Turkey’s President Erdogan is focused on the bigger regional picture and is hedging his regional and global relationships to ensure not only his, but Turkey’s long-term survivability, no matter the evolution of regional political, economic or military power.

It goes without saying, but needs to be emphasized, that Turkey is in an extremely dangerous and unstable part of the world.

Turkey’s survival depends not only on its ability to manage its political and military relationships with Europe and the United States, but also with Russia, the Middle East, and China.

Given the social, political, and economic instability of the region, Turkey, under the leadership of President Erdogan, is moving toward a leadership policy of complete and total dictatorial control with territorial expansion ambitions, similar to Iran, Saudi Arabia, and Russia.

 Consolidation Likely

To think the region will not consolidate is unrealistic. To date, Turkey has partnered with the United States and NATO for security; Turkey is a major trade partner of the European Union; Turkey has partnered heavily with Russia and Iran on energy issues; and Turkey is reaching out to China and strengthening their relationship.

Turkish President Recep Tayyip Erdogan dictatorial ambitions and failing economic leadership are worsening the country’s ongoing financial and currency crisis, which potentially could result in an economic collapse in turkey and destabilize the entire European and Middle East region, which in turn would mean global destabilization.

U.S. intervention and attention to detail by President Trump, Congress and the U.S. Central Bank are now critically important in maintaining European, Middle East and Global stability and minimizing potentially expanding contagion from the Turkish Financial Crisis.

 U.S. and global currency, bond, equity and commodity markets are being directly affected by the current ongoing Turkish Financial Crisis. This crisis, coupled with other global uncertainties related to China, Russia, European Union, Iran, and Saudi Arabia, to name a few, has raised concerns about the maintenance of global economic momentum. This has many global equity markets correcting, the 10-Year U.S. Treasury Yield turning bullish or declining, the dollar strengthening, and many commodities, especially oil, showing near term weakness.    

 Global growth will be maintained

I still expect orchestrated global growth will likely be maintained and a recession will be avoided for 2 to 3 or more years. I expect near term global markets to be turbulent. The resolve of President Trump, Congress, and the U.S. Central Bank, along with their global counterparts, is far stronger than most imagine. Why? In today’s domestic and global economic setting, the economic consequences of anemic global growth include global recession or worse. A recession would be devastating for the U.S. and the world’s global economies, especially China.

 Weekly Market Outlook - Beginning August 20, 2018

 

Commodity Index, $CRB – Moving to retest support at 185 is underway (August 17, 2018 – 188.74).  Charts (B1-B5) Commodity bears need to see this index lose support at 185. This would likely imply major across the board commodity weakness, due to commodity fundamentals and global economic uncertainties. Near term the commodity bears have the upper hand.

Oil, $WTIC – Continues losing price momentum, a very cautious period. Consideration now must be given to a potential price decline to $54.33 (August 17, 2018 - $65.21). Charts (B6-B9) Big Picture: An interesting array of factors from fundamentals, to global policy drivers, to social, economic, political, and military uncertainties keep this market at elevated levels and they do not appear to be losing their influence anytime soon, which limits the downside.

Soybeans: Ending the week of August 20, 2018 above November $9.25 per bushel would be price supportive and likely mean a near term bottom is in place. Fundamentals and global uncertainties are major headwinds, but tightening aggregate global grain stocks is raising global food security concerns and possibly price supportive. Charts (B10-B13)

 Corn: Corn appears to have a sideways to up multi-week trading pattern in place. Ending the week of August 20, 2018 below $3.64 per bushel implies this market needs to retest its previous low at $3.39 per bushel. Charts (B14-B17)

Wheat: Bullish bias - Ending the week of August 20, 2018 above December $6.00 per bushel would open the door to achieving a price target of $6.44 or more per bushel. (B14-B17)

Long Grain Rice: Fundamentals are weighing heavy on this market. Closing the week of August 20, 2018 below $10.13 per cwt. implies additional price weakness ahead. (Chart B18-B20)

Cotton: Key consideration: If cotton can remain above December 77.9 cents per pound, this market has the potential to regain a bullish posture, given today’s global economic setting. Finishing the below 77.9 cents per pound would likely indicate serious price weakness lies ahead. Charts (B21-B24)

U.S. Dollar and Interest Rates: With diplomatic trade fairness talks between the U.S. and China seemingly bearing little fruit and with an array of European, Russian, Middle East, Turkey, Argentine, etc. uncertainties, near term, the dollar will likely have more strength than weakness and the 10 Year Treasury Yield should have additional weakness.

 UA Webinar: Agricultural Trade: China, NAFTA and Brazilian Agriculture in Focus with Dr. Luis A. Ribera, Professor and Extension Economist, Texas A&M, August 23, 2018, 2:30-4:00 PM CST

Ribera will discuss how important trade is for the well-being of U.S. farmers and how trade agreements influence trade flows. He will also address NAFTA and current renegotiation issues. Trade issues with China and the growth of Brazilian agricultural production will be examined.

Dr. Ribera is the Director of the Center for North American Studies and serves as the Program Director for International Projects with the Agricultural and Food Policy Center. His areas of interest are international trade, transportation, economic impacts and risk analysis. Dr. Ribera has been an invited speaker in over 300 conferences around the world and has brought over $27 million in research and extension funding for his programs.

Link to Register:  http://bit.ly/UAEX-NAFTA-Brazil-Trade-Ribera

 

Grain Market Outlook Video with Bryce Knorr, Senior Grain Market Analyst, Farm Futures, Thursday, produced August 16, 2018              

Bryce Knorr first joined Farm Futures Magazine in 1987. In addition to analyzing and writing about the commodity markets, he is a former futures introducing broker and is a registered Commodity Trading Advisor. He conducts Farm Futures exclusive surveys on acreage, production and management issues and is one of the analysts regularly contracted by business wire services before major USDA crop reports. Besides the Morning Call on www.FarmFutures.com he writes outlooks for corn, soybeans, and wheat that include selling price targets, charts and seasonal trends. His other outlooks on basis, energy, fertilizer and financial markets and feature price forecasts for key crop inputs. A journalist with 45 years of experience, he received the Master Writers Award from the American Agricultural Editors Association. Video Link: www.uaex.edu/ag-webinars

Bobby Coats is a professor in the Department of Agricultural Economics and Agribusiness, University of Arkansas System, Division of Agriculture, Cooperative Extension Service. E-mail: recoats@uark.edu.

Download Slide Show for charts and expanded details, Click Download Link

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