Clients have asked whether I consider "the rise of China" to be a "Black Swan," as described by the futures market mathematician Nicholas Taleb. I would say no, definitely not.
One of my physicians, whose vacation hobby is photography, has a mounted color photograph in his lobby of two black swans on a Canada lake, sailing majestically--as all swans do. Black swans are real, but simply rare. The same is true of a White Moose.
"The rise of China," on the other hand, is a one of kind reality, never seen on earth before. It is akin to other historical episodes such as the Roman Empire, or the British Empire, or the American Revolution--all of which, by the way, had enormous impacts during their time on "world" grain trade. But these impacts were unforeseen and not forecastable.
"The rise of China," over the past two decades and continuing now, is also more than "the elephant in the room." If you insist on an image, perhaps it's "the RED ELEPHANT in the room."
Whatever you decide to call it, you must of course have an opinion about it. But remember the dictionary definition of an "opinion":
A belief or judgment that rests on grounds insufficient to produce complete certainty.
In other words, don't pretend you can MODEL it mathematically, even though there's lots of data about it--some key parts of which I've given below.
Note column 1, China soybean imports of 87 mmt in 16-17, which in Column 2 is 3197 million bushels. In other words, China is now importing 50 percent more soybeans than the entire US soybean crush (1920 million bushels). Astonishing!
Look at columns 4, 5, and 6, the area planted requirements, given in million ACRES. Compare this with the area for corn ethanol in column 8. Look at column 15, China's share of world crude oil trade, and column 16, the world price of crude oil. Finally, note the overall impact of the "China Episode" on US corn-soybean net income in columns 20-23: a "wealth build" in seven years of over $150 billion. Something which has never happened in the history of the American cornbelt!
The set of 14 Collected Notes on China is here.
Read them over again on your way to the seminar in two weeks!
Seminar registration is here. View the agenda here.
