Reasonably Thinking

Severe flooding in Australia’s Queensland and New South Wales provinces looks to be disastrous, with some accounts labeling the catastrophe as a flood of biblical proportions.  Indeed, the amount of reported rainfall surpasses 250mm per the spring season, which is something that only happens about once a century.  The flooded waters are unlikely to fully recede for another month and will surely hinder the nation’s exports, especially coal, over the near term.  It is with this concern that I exited my Australian dollar position today, selling 15 shares of FXA at $100.56 for a small gain of $49.95.

 Image from Reuters

In addition, wheat may be ripe for a supply shock.  First, the flooding in Australia significantly strains the amount of high quality, human feed wheat available for export.  Second, Russia’s drought over the past several months will result in wheat export that is 80% less than the previous season.  Third, the central United States has not gotten the necessary snow cover for its wheat crops thus far.  Combining these variables heightens the possibility that wheat prices will soar over the next six months.

The trade:  the closest pure play I could use was the JJG ETF.  Perhaps one could argue Monsanto as an alternative, but I just haven’t done the legwork on that company.  Bought 30 JJG @ $52.05.

Keeping score…