It is difficult to say whether it’s 'Blue Monday', the concerning spread of COVID19 across all continents, or if it’s just a passing doubt, but we feel the current situation is a concern, both economically and in the commodity markets. 

Even before he is sworn in as President, Joe Biden has announced an enormous $1.9 trillion stimulus package to support their weakening economy, and in doing so has rekindled two major debates at the same time: 

• - To save the economy, should supply be favoured over demand? (Whoever answers ‘both’ has lost). 
• - How will the world's debt (led by the United States) be repaid? All governments promise, with hand on heart, not to raise taxes. If so, then there is only one option: the return of inflation. 

With this in mind, Janet Yellen will be the Secretary of the Treasury for the new American administration. She led the FED during the Clinton presidency so she is well versed, however her first task will surely be how to achieve a weaker dollar against other currencies and what is the right equilibrium with regards to inflation. What would be a satisfactory and manageable level of inflation, and what should be a bearable budget deficit in relation to GDP? 

The influx of liquidity, to excess in the US, has provoked a tidal wave on the stock market, with Tesla and GAFAM just some of the fortunate participants. The same is true of all commodity markets, which are seeing double-digit growth, driven by investment funds. 

In this respect, the progression of the sugar market is symptomatic; in just a few months the market has experienced its lows and has returned to highs thanks to massive purchases by the funds. Our market is also not to be outdone: going from 48 USC/Lb in April to close, a few months later, above 81 USC/lb. However, this progression raises questions in more than one respect: 

• - How could the USDA, the Department of Agriculture of the most economically and technologically powerful country in the world, be so massively wrong about global production, consumption, domestic production and carryover stocks? Last week's report alone cut US production by nearly one million bales, three months after the harvest began. How much credit can still be given to these figures? 
• - While China announces its lowest growth rate in the last 50 years (2.3% increase in 2020), world consumption of raw materials still relies on this ancient empire. Whatever the price, China continues to import soya, wheat, maize, cotton... Phase 1 of the Sino-American trade agreement is no longer a plausible explanation since the election defeat of D. Trump. 
• - Has global fragility, brought about by COVID19 made governments of the world protect themselves from food shortages by ordering more and more basic agricultural products?

Many people are still expecting cotton prices to soar, whispers even of the Holy Grail ($1/Lb). This meteoric rise in prices hides potential obstacles including a possible second and third wave of the epidemic, as well as all the questions about the effectiveness of vaccines or their availability. The effects of lockdowns on consumption already seem to have been forgotten. 

At the risk of sounding like ‘the fun police’, it seems too early to get excited. Fears of a turnaround in both equity markets and commodities must be kept in mind.