Global Grain blog


Interview with Pedro Dejneka, Partner and Co-Founder, MD Commodities

Published August 2018


Martijn Sinke, Bureau Veritas



What do you see as the two most important issues globally currently and why? How will these impact the market?

If we are talking exclusively about “economic/geo-political” issues, I’d say U.S. x China and the impact it is already having and can have going forward is front and center in most people’s minds.  The market so far had done a tremendous job of “rebalancing” itself in the face of the commercial “stand-off” between the U.S. x China, particularly in the case of soybeans.  Basically, China has gone shopping for Brazilian soybeans, taking export basis to levels unseen there, while the rest of the world enjoys U.S. soybeans at a great discount to its export competitor down south.  Aside from the soybean trade, the stand-off between the world’s two biggest economic powers has yet to show its full ugly head as far as consequences are concerned.  I am not talking about a dire or chaotic scenario, for as I mentioned above, markets have a tremendous capacity to “rebalance” in the face of major changes.  

That said, the U.S. x China commercial saga still has legs to go, with both countries seemingly willing to dig down deep for the “fight”.  It will be interesting to see how things shape up (we ultimately believe in an agreement, but it shall likely take much more time and effort than most of us think at this point), in a game where in our opinion the one that blinks first will not necessarily be the one that “loses”, but the one that will end up having to concede the most.  

The consequences of this continued stand-off go much further beyond the soybean trade, with Chinese GDP to soon start showing collateral effects as well as potential upward pressure in U.S. inflation.  The latter can potentially be a dangerous and tricky side-effect for the U.S. – if inflation picks up due to the U.S. x China conflict, it would be a temporary pick up in our view, due to extraordinary circumstances.  However, if the FED continues hiking rates in response to this potential side-effect, it could be setting itself up for having to reverse course later in 2019 into early 2020 as the U.S. economy in our opinion, particularly the consumer, is not and will not be quite ready for rates at levels much above where they currently are.  It would be wise for the FED to not “overreact” to a potential pick up in inflation in the next 3-9 months… 


What impact will current market conditions have on market fundamentals for the next marketing year and production in your region? What are the implications for grain and oilseed pricing?

The U.S. x China standoff shall continue having potentially major consequences to both Brazilian and U.S. oilseed/grain production and marketing.  If the standoff goes into Q1 and specially Q2 2019, the U.S. farmer will likely pull a major switch of some 2-4 million hectares from soybeans to corn.  This would potentially set up the soybean market for much better support into mid-late 2019, but in turn would be a large weight on the shoulders of corn prices.  The soybean/corn ratio should easily work back towards 2.7-3.0 under this scenario.  That said, we could see the exact opposite scenario in Brazil, as farmers would have even more incentive to increase their soybean seedings.  

If we do see a U.S. x China accord before Q1 2019, we believe it would include major upwards revisions to U.S. soybean exports, bringing CBOT soy prices quickly back towards the $10 - $10,50 mark but in our view, still keeping the U.S. farmer uneasy regarding the soybean market.  Under this scenario, corn seedings in 2019 should still outperform soybean seedings, but to a much smaller degree than scenario #1 above.  

The key for late 2018 and forward remains:  When will U.S. and China agree to terms and will they?  As we can see, the trend for both the soybean and corn markets shall remain directly tied to this in the near future, we different possible scenarios keeping traders and the trade as a whole on their toes…


What do you think has been the biggest change in the grain and oilseed industry over the last 24-36 months?

Are we seeing a historical shift in world share of trade between North and South America? That could certainly be the case going forward IF U.S. x China cannot make commercial amends.  


Do you think the role of the grain or oilseed trader has changed in the last 5 years? If so in what way?

The speed and relatively ease of access to information has absolutely changed the landscape for the commodity trader community.  On the other hand, the growth of unchecked information sources, fake-news, and the continued growth of use of algorithms make for a very challenging and complex environment, where most often opinions and perceptions that are quite far from reality bring about exaggerated market movements.  In this “new reality”, traders must not “fall in love” with an opinion or position and quite often, to stay in the game, be very willing to quickly change or adapt their book to hedge even for scenarios that go completely against one’s belief.  



What affect is/will weather have on grain and oilseed prices?

Weather is always a “wild-card” to agricultural commodity trading.  However, we have seen production in some areas of the world “defy logic” in recent years, with outstanding yields achieved even in the face of challenging weather conditions (2017 U.S. corn and soybean production comes to mind). 

The *potential* for the arrival of El-Niño later in 2018 can add another piece of volatility to prices – although production in Argentina under such possible scenario has a high probability of seeing a very nice rebound from this year’s historical drought – while Brazilian production of soybeans and corn do not have much of a direct correlation to El Niño.  

U.S. summer weather of 2019 is shaping up take on even more importance IF we see a reduction in soybean area in the country as outlined above.



What can we expect from the Black Sea region going forward and how will it affect the global grain industry? 


I will leave more in-depth analysis of the Black Sea region to the local experts – however – the potential for growth in corn/soybean trade in and from the region, more specifically with China, is a very interesting potential development for the following years. 

What do you think will be the next hotspot region and why?


South America, Brazil especially shall continue taking on a larger share in world trade (even though the “threat” of a massive bilateral soybean trade agreement between U.S. x China exists).  The Black Sea region also has tremendous growth potential both in production and exports.  Will the U.S. be able to “defend” or even revert its declining share in world soybean and wheat trade? Last but not least, will Africa one day become a major producing region?  Those are all regions and topics “to watch”. 


About you

How did you get in to the industry?

I started my career in the financial markets working for some of the largest financial institutions in the world and have always been fascinated by the “trading” aspect of the financial industry.  Early on, the commodity markets caught my attention and I slowly made the transition, looking to capitalize not only on my interest in commodities, but also on my background being born and raised in Brazil but building a career in the United States.  While still in college I dreamed of “building a bridge” professionally between Brazil and the U.S. and I am very thankful to be able to have done that to this point… 

If you weren’t in the grain and oilseed/agriculture industry, what industry would you have gone in to? 

No doubt sports coaching.  I have a tremendous passion for the power of sports in people’s lives and as a former athlete and current part-time coach in basketball and “soccer”, I have seen and continuously see first-hand the impact sports and the life-lessons it teaches can have, especially in young people’s lives. 

If you could take 3 things to a desert island that are not practical (ie. a boat, rope or a knife); what would they be?

I guess most “things” would indeed have some “practical” purpose – but let’s humor the great question:

John Wooden Book - “Wooden”
My Cell Phone 
Small Solar Energy Panel



You can hear more from Pedro at Global Grain South America, taking place on 12 - 13 September 2018. 






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