Second-half softening tests world economy

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15 July 2010

Commentary from Peter Hall, vice president and chief economist, Export Development Canada (EDC).

The pressure is rising. Slower growth is etched all over current data, dampening the bullish mood that dominated the airwaves in the first quarter. Markets are in yet another turbulent phase as we move into the post-stimulus phase of the rebound – perhaps the trickiest period in the past two years.

World growth figures for 2010 are much stronger than initial forecasts expected. Economic heavy-hitters cranked out impressive rebound-style growth in the fourth quarter of 2009 and the first quarter of this year. Forecasts were revised upward, and a growing chorus of analysts hailed the arrival of the long-sought recovery. Stock markets were pleased, and embarked on a spirited 3-month rally.

That all changed in late...

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Poll

Will Russia’s recent ban on grain exports result in a significant rise in private risk insurance claims from grain traders unable to fulfil their contracts?

Yes – there will be more claims. The government’s actions allow traders, with PRI cover, to make claims through contract frustration.

No - the majority of Russia’s wheat production, some 70%-80%, is used for domestic consumption so the contracts represent only a small portion of the total wheat market, limiting the amount of potential claims.

23%

No - traders had a week’s notice before the ban allowing them to secure alternative supplies to fulfil contracts stated as optional origin.

23%

Maybe - but claims are likely to be limited to traders dealing in soft wheat whose contracts demand they source wheat only from Russia.

46%