- 01Grains spike; importers and EMs feel the squeeze.
- 02Earnings growth via unrealised gains, not ops.
- 03Copper discovery drought deepens supply squeeze.
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If you're an ASX resources investor come and say g'day, or catch the interviews as they drop.
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G'day team,
Quick one this week, three things crossed my feed that are worth your time, and they all rhyme with each other more than you'd expect.
Grains Still Ripping, and Who Actually Pays for it
Between the brutal heat across Europe this summer and the wipeout of Black Sea grain corridors, EU corn and soymeal are printing fresh all time highs, and wheat's ripping right alongside them.
The bit worth sitting with is who actually wears this. Rich sovereigns will bitch and moan but still pay up to secure supply. For the Global South, that's not even an option, and key net importers like Egypt are already getting squeezed hard.
Half the emerging market complex relies on raw commodity exports to keep the lights on, so an ag spike like this isn't just a grocery bill problem, it's the exact setup that fed into the Arab Spring last time round.
Worth watching where this goes rather than just clipping the coupon on the grain trade.
A Different Kind of Red Flag
Away from the paddocks, Mike Zaccardi flagged something out of JPMorgan Asset Management that deserves more attention than it's getting.
An unusually high share of S&P 500 earnings growth is now coming from unrealised valuation gains on stakes in Anthropic and OpenAI, not from actual operating performance.
Look at the gap between the gold bars and the black dots on that chart, aggregate EPS growth is pushing 49% this quarter, but median stock EPS growth is sitting closer to 12%.
That's a market being carried by a handful of paper gains, not broad earnings strength. Keep that in mind next time someone quotes you the index level number.
Copper's Discovery Drought Just Got Worse
This one ties straight back to the copper squeeze story from last week's note. S&P Global Market Intelligence data on major copper discoveries since 1990 makes for grim reading if you're relying on new supply to bail out the deficit.
Just 263 major discoveries in 35 years, and the discovery rate has fallen off a cliff since the early 2010s despite exploration budgets sitting near cycle highs again. Explorers are spending more to find less.
Most of the older discoveries are already operational, so the easy inventory has been mined through, and what's left is concentrated overwhelmingly in Latin America and Asia Pacific, hardly the most straightforward jurisdictions to permit and build in.
Layer this on top of Chile's production peaking in 2027 from last week's note, and the supply side of this story keeps getting tighter, not looser.
The Asymmetry Trade
Tavi Costa put the whole thesis in one chart. The mining industry represents only about 1% of the entire global equity market, sitting near a century low. He doesn't know whether that share rises to 2%, 5%, 10% or higher over the next decade, but reckons it's difficult to imagine it falling much further from here.
AI infrastructure build out, onshoring, the EV revolution, critical metals demand and a US administration actively pushing for domestic supply, all pointing the same direction. Call it asymmetry in its purest form.
If any of this resonates, Gold Coast this week is the place to be, half the ASX resources sector will be in the room.
Stay safe and all the best,
James
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