Oil tanker and dry bulk rates

And two more commodity-price related charts to finish off the week. The first one plots oil tanker real daily rates for the past 33 years. Interesting that whilst current rates are certainly low ($34,000 per day) they do not appear to be as low as they were in the first half of the 1980s... but, wait a moment! The rates for the 80s refer to a 250,000 ton single hull vessel, whereas the current rate refers to a 285,000 ton double hull vessel, so perhaps real rates are closer to the 1980s bottom that it appears at first sight.



Tanker rates have, of course, not fallen as much as dry bulk rates (iron ore, coal, grain) with the Baltic Exchange's Dry Index currently being nearly 80% below what it was at its peak in May last year, despite a tremedous rally since hitting the botton at the beginning of December (it has increased by 350% since!).

Petróleo y oro

Y para completar el tema de las materias primas dos extractos del libro "The Prize: the Epic Quest for Oil, Money & Power" de Daniel Yergin, presidente de Cambridge Energy Research Associates. El primero muestra los precios reales del petróleo desde 1861 hasta mediados del año pasado (página 778 del libro).



El segundo extracto, también muy interesante, se encuentra en la página 274 y se trata de los detalles del contrato entre Socal e Ibn Saud, la primera concesión de exploración petrolífera en lo que hoy denominamos Arabia Saudí:

"The agreement provided for a £35,000 payment in gold up front - £30,000 being a loan, and £5,000 as the first year's royalty paid in advance. [...] The only remaining problem was how to obtain that much gold. Because America had just gone off the gold standard, Socal's efforts to dispatch the gold directly from the United States were turned down by Assistant Secretary of the Treasury Dean Acheson. But finally, the Guaranty Trust's London office, acting on behalf of Socal, obtained thirty-five thousand gold sovereigns from the Royal Mint, and they were transported to Saudi Arabia in seven boxes on a ship belonging to the P&O line. Care had been taken that all the coins bore the likeness of a male English monarch, and not Queen Victoria, which, it was feared, would have devalued them in the male-dominated society of Saudi Arabia."

¿Ha sido desde entonces el petróleo tan buen medio para conservar el valor como el oro?

Precios agrícolas y más oro

Siguiendo con el tema de las materias primas iniciado ayer.

En sus entrevistas en Bloomberg Jim Rogers no se cansa de decir que la inversión en materias primas es el futuro. Es interesante escucharle una vez, pero después de un par de entrevistas empieza a parecer repetitivo. Le encanta decir que en el futuro los que conducirán los Lamborghinis y los Maseratis serán los granjeros y no los banqueros de Wall Street. Sin dudar que la agricultura tiene un buen futuro a medio plazo, tengo mis dudas sobre la sabiduría de invertir en productos agrícolas a la Rogers.

Rogers señala que los precios de todos los productos agrícolas están en niveles muy bajos en relación a su promedio histórico. Como demuestran los siguientes dos gráficos esa observación es correcta, por lo menos en lo que respecta a los últimos 36 años (perdón por la escala logarítmica en los precios NYBOT, pero es que el café a finales de los 70 alcanzó unos precios tan altos que se salían del gráfico).




Pero de aceptar esa observación a decir que los productos agrícolas son una buena inversión hay un razonamiento maltusiano que yo no comparto: la población mundial sigue creciendo y la tierra cultivable (o el agua) tiene límites, así que va a haber problemas de abastecimiento en un futuro no lejano. No comparto esta postura porque:

(1) Como sabemos el ritmo de crecimiento de la población mundial es cada vez menor y la previsión es que se estabilice a mediados de siglo por debajo de los 10.000 millones de personas (un crecimiento de tan sólo un 50% con respecto a la población actual).

(2) Los avances técnicos no dejan de sorprender. Así en los últimos cuarenta años el rendimiento por hectárea en los Estados Unidos ha crecido en torno al 50% para la soja y el trigo, un 67% para el algodón y casi se ha doblado en el caso del maíz. Pero es que hay muchas partes del mundo menos intensificadas y en las que el potencial para incrementar la producción agrícola es mucho mayor que este – y queda ilustrado por el incremento en el rendimiento agrícola en Brasil en los últimos cuarenta años, mucho mayor que en Estados Unidos, como se observa en el gráfico.



Así que en base a esta evidencia yo me mostraría escéptico con respecto a la rentabilidad de inversiones en materias primas agrícolas.

Postdata sobre el oro: a propósito de mi escepticismo sobre la inversión en oro o la capacidad del oro de preservar el valor (cosas distintas, vale) hay un artículo interesante hoy en Libertad Digital. Y he encontrado el siguiente cuadro (cuadro completo aquí) , que también ayuda a poner las cosas en contexto. La zona euro está mucho mejor respaldada por oro que los Estados Unidos – casi 11.000 toneladas (incluyendo las reservas de países que no aparecen en este top ten) comparadas con apenas 8.000 toneladas. Esto, junto con la mayor cautela a la hora de expandir la base monetaria del Banco Central Europeo, sugiere que el valor del euro es más seguro que el del dólar a medio plazo. Aunque el gran riesgo, claro está, se encuentra en la presión política que se pueda ejercer sobre el Banco Central Europeo en caso de que algunos países empiecen a encontrar dificultades colocando su deuda pública.Así, poco a poco, me voy convenciendo a mí mismo de que a lo mejor no sería mala idea el comprar algo de oro.

Inversión en metales

A propósito de un intercambio en el blog de Juan Ramón Rallo sobre la inversión en oro y el patrón oro he producido este gráfico. Si tuviera que escoger uno de estos metales creo que en base a esta evidencia preferiría la plata. Su precio real está todavía por debajo del que tuvo entre 1975 y 1985 (y hasta seis veces inferior al precio que alcanzó entre diciembre de 1979 y marzo de 1980).



Actualización: Debería haber publicado esta anotación sólamente como un gráfico bonito e interesante. Dos correcciones.

(1) Resulta que durante gran parte de los 70 y culminando en enero de 1980 los hermanos Hunt intentaron acorralar (?) el mercado de la plata, de modo que el precio de la plata a finales del 79 / prinicipios del 80 está artificialmente alto, como seguramente también lo está en los años previos (más información en entrada sobre uno de los hermanos Hunt en wikipedia).

(2) El debate sobre el oro no era acerca de dónde invertir, sino de cómo preservar el valor. Con lo cual me surge la duda: ¿se puede decir que un activo que se depreció en términos reales un 60% entre 1987 y 1999 es un buen medio de preservar valor?

Happy economic 2009, Malawi

Happy New Year, I say as I frantically try to get this out before January is over (still writing from Honduras, where I am working until Saturday)! It certainly seems set to be a happier New Year in Malawi than in most other places in the World – at least as far as economic growth is concerned. Hopefully 2009 will also see Malawi follow in the steps of Ghana’s exemplary elections.

Three weeks ago The Economist ranked Malawi’s expected economic growth for 2009 as the second fastest in the World.



The IMF approved and disbursed in December a $77m External Shock Facility – a very welcome vote of confidence on Malawi’s progress and at the same time a much needed forex injection. The report is now available and at 6.7% has a more moderate growth forecast for 2009 than The Economist.

1. Commodity prices
Malawi’s best economist, Dr. Khwima Nthara, worried about the impact of the financial crisis on Malawi on the World Bank's Africa Can (End Poverty) blog - wondering whether we might expect some bad news as a result of second round impacts through lower commodity prices. I feel the picture on commodities for 2009 in Malawi is far from clear, with a lot of potential upside.

(1.1) Tobacco. As I commented in my latest economic update sales at the auction floors for the 2008 season hit a historical record of $465 million. This was an increase of $280 million on 2007 and reflected both record historical prices (at an average of $2.43 per kg) and record volumes (at 190 million kg).

The very positive results of the 2008 season should provide greater incentives to grow tobacco this season. Therefore, greater hectarage can be expected, although yields might decline as a result of lower fertilizer application due to the increase in fertilizer prices (more on this below). On balance I suspect the buyers and the Tobacco Control Commission will be expecting a (substantially?) larger crop.

The question is then whether last season’s prices will be maintained. It is worth pointing out that despite the general collapse in commodity prices since their peak in July 2008, there are some agricultural commodities such as sugar and cocoa that have bucked the general decline (with cocoa prices rising over 50% in the last six months). So price declines in the coming auction season are not necessarily a given.

(1.2) Uranium. Paladin state that they are still on track to ramp up uranium production from Kayelekera from March. Prices of uranium have fallen dramatically from their peak 18 months ago of $120 per lb. Nevertheless, at current prices of $48 per lb, Malawi can still expect uranium exports of over to $150 million per annum, representing a step-increase in GDP of over 3%. Exports in 2009 are likely to be around $75 million, as the mine takes about six months to reach its target production of 3.3 million pounds of uranium per annum.

(1.3) Sugar. In November Illovo, the country’s only producer of processed sugar, announced the results for its operations in the six months to end September. The Malawi operation has always been the star performer of this regional group, contributing 17% of its total revenue and 41% of operating profit in the last full year.

Malawi’s performance in the first half of the current year was even more impressive: operating profit in the first six months was equivalent to approximately $53 million, compared to $61 million for the last full year. In other words, Illovo is on track for an increase in full year earnings this year of over 50%.

Although the financial statement does not provide the details, it is likely that this increase is largely driven by increased domestic consumption, a signal of increased disposable income among Malawi’s population.

(1.4) Fertilizer. We all know how dependent Malawi is on imported fertilizer, with or without a humongous Government fertilizer subsidy. The IMF’s latest estimates of the Terms of Trade impact of the 2008 fertilizer price increases was that Malawi required an additional $123 million for the year. In my view this is an underestimate: imports for the 2008 subsidy amount to 200,000 tons at an average price that is $670 per ton higher than the 2007 price. So the impact on the subsidy programme alone is already greater than the IMF estimate. If we add commercial imports my sense is that in 2008 Malawi required an additional $200 million (5% of GDP) to pay for its fertilizer imports.



The great news is that the gains in fertilizer prices of 2008 have been totally reversed, and are now back at their early 2007 levels, and shipping prices (the Baltic Exchange Dry Index) has fallen to the lowest level in over a decade. These two factors should result in a positive Terms of Trade shock of well in excess of $200 million in 2009 (again much higher than the IMF’s latest estimate of $102 million).

(1.5) Oil. On oil I have neither the inclination nor time to challenge the IMF estimates, so I just report here what they state. In 2008 Malawi required an additional $62 million to finance its fuel imports. As we know oil prices have fallen by two thirds since their peak in July 2008, and the IMF now estimate that this will represent a saving of $77 million in 2009 to Malawi’s economy.

2. Maize prices
Something bizarre continues to go on with Malawi’s maize prices. The attached shows prices to the first week of December – more recent figures have confirmed further increases. So prices have remained above $350 per ton since July and have recently broken above the $400 per ton barrier. This did not even happen in the 2005-06 food crisis. And whereas in July those price levels might have been consistent with world maize prices (as shown in the chart below), those world reference prices (Chicago and Jo’burg) have now fallen back to about $160 per ton.



As I said above my view is that the huge improvement in Illovo’s business is a sure sign of greater prosperity amongst the bulk of Malawi’s population. And yet these price levels have worrying implications for some sectors of the population, particularly those right at the bottom of the income distribution.

Views on what is going on are more than welcome – I want to hear from people who might know something the rest of us don’t.

3. The latest macroeconomic indicators
The latest macroeconomic indicators from the Reserve Bank of Malawi are now available, with data to the end of December 2008 (I was actually just waiting for it before finalising this update). The figures are, as always, revealing.

(3.1) Forex reserves. The chart below shows the forex situation towards the end of last year became more precarious than it had been at any time since early 2005. Official foreign reserves fell to just $70 million in October, presumably as a result of the large forex requirement for fertilizer imports. This continued precarious situation, in which Malawi appears incapable of stabilising its reserves at a level above two months of imports, provided the justification for the IMF’s ESF approval. The $77 million ESF disbursement plus presumably other substantial donor inflows in December resulted in reserves rising back to safer levels of nearly $300 million.



Nevertheless, the continued precariousness of the foreign reserves surely should make the authorities question the wisdom of their strong peg to the US$. In the past four months, apart from the Japanese yen, all serious World currencies have depreciated against the greenback. In this context it does not make any sense for Malawi to remain pegged at an artificially overvalued rate of K140 per US$ - even more so when some commentators are convincingly arguing that this overvaluation is the main immediate constraint to faster economic growth.

(3.2) Inflation and interest rates. Inflation has continued to creep up slowly, hitting 9.9% in December. Commercial interest rates remain at 19.3%, which means that for the first time in the decade real interest rates are possibly below 10%.



(3.3) Credit growth. In the context of the rapid deterioration of the credit market globally credit to the private sector in Malawi grew 50% in the last four months of 2008, closing the year at $464 million. Credit to Government also experienced a large step increase. If I have to guess what is going on here I would say that this increase is the result of the huge financing costs of fertilizer imports after World prices more than doubled in the months to July 2008. So for the time being the effects of the global credit crunch have not been felt in Malawi.



In conclusion…
Economic prospects are positive for Malawi despite the global financial and economic turmoil. It seems that the 2009 elections and improving the exchange rate management regime are, at the moment, much more important for Malawi’s continued progress than the potential impact of the global crisis.