Episode 33 Recent BRICS+ Efforts Amid Global Trade Shifts

On this episode of Morning Coffee & Ag Markets, Riley is joined by Dr. Ryan Loy to explore the growing influence of the BRICS+ coalition on global trade. The BRICS+ nations, now producing a substantial share of the world’s key commodities, are pushing to reduce their reliance on the U.S. dollar, focusing on "de-dollarization." Riley and Dr. Loy will discuss how this shift could reshape global markets, the challenges BRICS+ faces in uniting diverse economies, and what the future holds for the U.S. dollar's role in international trade. Tune in for insights into these critical developments! 

Transcript

00;00;07;14 - 00;00;25;27
Riley Smith
But anyway, enough with the chit chat. Let's get right to it. So good morning. Good morning. Welcome to another episode of Morning Coffee and AG Markets with your host, Riley Smith. And this morning, me and Dr. Ryan Loy are sitting in the studio at the little Rock office. Here together, we finally, the production season is kind of slowing down.

00;00;26;01 - 00;00;35;04
Dr. Ryan Loy
Yeah, I've got, we've. Hunter and I have some meetings, Thursday, Friday this week, and then I've got two next week. And I think that's about it for wrapping up the, production. Yeah.

00;00;35;04 - 00;00;37;13
Riley Smith
And teaching. Y'all are teaching class and.

00;00;37;16 - 00;00;43;10
Dr. Ryan Loy
Yep, I'm teaching class. And I know Hunter's getting ready to do that, I believe next semester. But it's been going well so far.

00;00;43;10 - 00;00;50;08
Riley Smith
Yeah your fixing to enter March and it won't be long, and you'll be about two months out, and you'll be done with that, won't you? Finals are first week of May?

00;00;50;08 - 00;00;53;12
Dr. Ryan Loy
Yeah, I think it's the first week in May is when the exam week is.

00;00;53;12 - 00;00;54;03
Riley Smith
So let's we'll.

00;00;54;03 - 00;00;58;01
Dr. Ryan Loy
See how that goes. I mean, I don't know how that's going to work online, but we're going to we're going to figure that out.

00;00;58;01 - 00;01;13;10
Riley Smith
But the slowing down of the production seasons allowed us to get in the studio again. And we're going to try to, from here on out, we're going to try to do it from from the seat, the studio, unless we're doing a roundtable, then we'll do that on the mobile equipment. But any who. Today, we've got him in here.

00;01;13;12 - 00;01;23;17
Riley Smith
We're going to talk about recent BRICS Efforts Amid Global Trade Shifts. So if you want to, would you just give a little background on on this and what BRICS is?

00;01;23;18 - 00;01;42;20
Dr. Ryan Loy
Yes. Riley, and thank you for that introduction. So, you know, very quickly, one of the things that, you know, we've been asked about to talk about in the counties this year and at some of the meetings we've done this year, is just talking about global trade and what that looks like. You know, we're very export heavy when it comes to our ag production here in Arkansas, really in the US as a whole.

00;01;42;23 - 00;02;05;27
Dr. Ryan Loy
And so it's really important to understand, you know, geopolitical shifts and changes and policy changes and how that could really impact our trade with other countries and our market share in the global trade, especially for agricultural commodities such as soybean, corn, rice, those sorts of things. And, you know, historically, you know, the US has been that economic powerhouse with the long standing trust among their global trade partners.

00;02;05;27 - 00;02;28;10
Dr. Ryan Loy
And we still have that. We still have that. And that's one of our main superpowers is, you know, that long standing trust, that economic powerhouse that we are. However, you know, a lot of uncertainty in the last, you know, let's talk me in, let's say decade, even five years, you know, uncertainty from the 2018 trade war, the Covid pandemic, and then the Russian Ukraine war has really shifted a lot of these global trade relationships.

00;02;28;10 - 00;02;51;25
Dr. Ryan Loy
Now, one of the important things here is that this is, you know, talking about BRICS. And I'll kind of explain that in just a minute. And talking about global trade is a Pandora's box. You know, we could we could sit here all day and barely scratched the surface to understand why these things happen. But the perspective we're going to take today is just kind of from a 30,000ft view as to what's going on and what these implications could have moving forward into this marketing year.

00;02;51;26 - 00;02;52;03
Dr. Ryan Loy
You know.

00;02;52;03 - 00;03;09;23
Riley Smith
It's funny, I think last time we talked about BRICS and I should have said BRICS plus because it is BRICS plus. Now it's not just BRICS. And that's that was going to be my next question. But I think you said from the, from the beginning that it was for Pandora's box, that it's so large.

00;03;09;23 - 00;03;10;08
Dr. Ryan Loy
It's large.

00;03;10;08 - 00;03;12;06
Riley Smith
It's kind of hard to get your head wrapped up. It is a.

00;03;12;06 - 00;03;28;13
Dr. Ryan Loy
Very it really is. And even for me, if somebody who finds this, you know, very fascinating and, you know, reading on it, I, you've got to kind of reread some of these things several times, just understand the how these things work together. But really and to kind of get to the meat and potatoes of what we're talking about today.

00;03;28;19 - 00;03;58;01
Dr. Ryan Loy
BRICS plus is a formal governmental coalition comprising of five core members. Those five core members are Brazil, Russia, India, China and South Africa, hence BRICS. It's an acronym and the plus is from the five most recent members which contain Egypt, Ethiopia, Iran, the United Arab Emirates, Nigeria and Indonesia. So those are the new ones in Nigeria and Indonesia are the newest players in the they joined this year in 2025.

00;03;58;07 - 00;04;20;19
Dr. Ryan Loy
So ever since I actually started giving this talk, two new countries have joined Indonesia, Nigeria. So why is this a big deal? Why are we even talking about it? Well, this organization, this organization, this coalition, aims to develop stronger trade relationships between those countries within that coalition and that agreement, which was created following the 2008 global financial crisis.

00;04;20;19 - 00;04;47;27
Dr. Ryan Loy
Now, I bring that up because, you know, folks are starting to talk about it now because of all the other confounding factors, such as the trade war pandemic and the Russian Ukraine war. But this has been around since the global financial crisis of 2008. And what ended up happening in the reason that they're doing this is because that financial crisis, you know, the US was kind of the center of it, but it was a global financial crisis because the world uses US dollars, right?

00;04;47;28 - 00;05;07;06
Dr. Ryan Loy
The US dollar is that world currency, that global currency. And so because of that, when it drops or anything's happened on our end for monetary policy and we make changes, monetary policy changes, that's going to impact the whole world. And so these countries looked at that and said, well, we don't want to be exposed to that anymore. We want our own agreement.

00;05;07;06 - 00;05;28;07
Dr. Ryan Loy
We want our own trade. And we want to basically, in its very essence, kind of treat this like a duopoly, wherein there's only a few countries that are kind of controlling that market for those commodities and kind of have it just trading among themselves. Now, currently, BRICS plus nations account for roughly about 25% of the global gross domestic product output.

00;05;28;07 - 00;06;09;00
Dr. Ryan Loy
So what that what those countries produce all together, accounts for about 25% of the global world output. The combined GDP now is nearly exact. Exact that of the United States, which has really steadily lost GDP share since about 2000. And I have a figure in the newsletter this week that kind of shows that from 2000 and to, to 2023, the last, data, data available and shows just how that shift in that, global GDP output, looks like, BRICS plus nations, you know, combined currently produce about 44% of the world's grain, 33% of the total wheat and rice exports in the world, and about 25% of the global corn exports.

00;06;09;00 - 00;06;24;13
Dr. Ryan Loy
So we're talking about some major players in the agriculture sector. And really I say players. There's really one major player here and it's really Brazil when it comes to the agriculture production. Now you have India on the right side, but Brazil is the one that really is kind of the jack of all trades.

00;06;24;13 - 00;06;33;00
Riley Smith
Well, you look at you look at the WASDE reports and I mean obviously they're taking over the, you know, they're dominating corn soybean and cotton.

00;06;33;01 - 00;06;42;04
Dr. Ryan Loy
That's right. You know cotton. But cotton especially, you know, cotton, they, they just overtook us. I think in 2008, the United States had about 44% of the global cotton share.

00;06;42;04 - 00;06;52;24
Riley Smith
You know, we had a we had me and Scott talked about it and we had a production, I mean, us as a whole had a record yield year and production in beans. So in an all commodities.

00;06;52;24 - 00;06;53;05
Dr. Ryan Loy
Yep.

00;06;53;06 - 00;07;03;08
Riley Smith
But Brazil did too. Yep. And they're also number one exporter of corn soybeans. And I think they're number one now in cotton. We were number one there.

00;07;03;08 - 00;07;18;11
Dr. Ryan Loy
They they took us over in the market share for cotton last year. And so I think we're at like 26%. They're at 30% now. But we've steadily fallen and they've they've kind of captured that gap. And one of the important parts here is, you know, we've had we've seen some price upside for soybean and corn this year so far.

00;07;18;11 - 00;07;36;19
Dr. Ryan Loy
They've been kind of on a tear, you know, this year. And that's one of the things we've seen. You know however a lot of that is from, you know, looking at Brazil and the drought that they could have. And I remember having this conversation last year about Brazil and their drought. And what do you know, they had a world, they had a record yields or they had record crop, you know, overall record production.

00;07;36;19 - 00;07;59;01
Dr. Ryan Loy
And so, you know, I wouldn't count them out just yet, even if there is an expectation of a drought, later this year. But we're talking about BRICS and we're talking about what this means to us at the US, US trade. And so what BRICS seeks to do is actually leverage their increase in that GDP and global share and commodity production and trade to reduce its reliance on the US dollar.

00;07;59;02 - 00;08;22;07
Dr. Ryan Loy
That's one of their biggest motivations. They don't want to use the US dollar. Currently, debt instruments, like other debt instruments that countries hold from us, they're issued in USD, must be paid back in USD and most trades are settled in USD. So again, from those countries perspectives, they're saying, okay, we have to rely on the monetary policy of the US and those sorts of things.

00;08;22;09 - 00;08;44;18
Dr. Ryan Loy
Now what they're trying to do is remove the US dollar, international trade and finance in the process known as dollarization. Now, the motivation for doing this is kind of twofold is political. One, the US has a strained relationship with China and Russia. So really anything they can do, they're going to do it to try to kind of under, you know, kind of undercut us just because that's the geopolitical relationship.

00;08;44;21 - 00;09;04;08
Dr. Ryan Loy
And the other reason they're doing it is risk mitigating for the reasons I kind of talked about before with monetary policy here. Now they're trying to, you know, limit those vulnerabilities. And, you know, in dollar dependance on the US dollar, you know, for a good example right now is, the sanctions on Russia. You know, they can't do anything in US dollar right now.

00;09;04;08 - 00;09;24;10
Dr. Ryan Loy
So if they didn't have to rely on the US dollar, those types of deals wouldn't be as big of a deal. From their perspective. That's the idea. So really I kind of want to talk about, you know, what are they doing for dollarization right now? Well, one, foreign exchange reserves, you know, they hold about 42% of the global foreign exchange reserves.

00;09;24;12 - 00;09;46;13
Dr. Ryan Loy
And it essentially means that they hold 42% of other developed countries currency in their reserves. Most of that is United States dollar. So what we see from that perspective is, you know, those central banks of the foreign countries, they hold that currency because when they do trades, they have to have exchange rates and things are different. So they need extra money to to make up for those exchange rates.

00;09;46;16 - 00;10;02;27
Dr. Ryan Loy
But in this case, they're doing it for that reason. And to kind of create a, you know, in a very simplistic definition, kind of a scarcity, the United States dollar in the market, if there's a scarcity, the price of it's going to go up, the value of it's going to go up. And therefore the strength of our dollar will go up.

00;10;02;29 - 00;10;23;00
Dr. Ryan Loy
And it's difficult for us to compete on the global market. And I'll get to why that's an issue with Brazil here in just a minute. Another thing is they're trying to promote local currency denominated trade. So again, they're trying to move other countries off of paying each other in US dollar. So why don't you trade in your local currencies and decreasing the dollar's role in international debt securities.

00;10;23;00 - 00;10;42;25
Dr. Ryan Loy
So, for example, debt instruments that are paid in United States dollars. So really, all in all, you know, one of the things I want to talk about is this, idea of, you know, that be in BRICS, which is Brazil, and they represent that the coalition's mechanism for success. To be honest, this BRICS idea doesn't work without Brazil.

00;10;42;25 - 00;11;03;07
Dr. Ryan Loy
You know, China is really the one who's holding a lot of those reserves, you know, holding a lot of the gold as well. You know, they they're increasing their assets of gold because they're trying to move off of that dollar. But the only reason they're really able to do this is because they have a partner in this coalition that can produce all these hard commodities cheaply, effectively.

00;11;03;10 - 00;11;22;27
Dr. Ryan Loy
And, you know, they have a good relationship with them. So it works out on China. And from China's front now, one of the main driving forces behind this trade organization is that relationship between the United States and China. You know, geopolitical tensions have always existed, but the 2018 trade war and the pandemic have really exacerbated those issues.

00;11;22;29 - 00;11;49;11
Dr. Ryan Loy
And so since then, China has really reduced its reliance on US grown commodities and shifted its focus and investment towards Brazil. Brazil is now become China's leading partner for soybeans and corn, and the US is going to struggle to really regain that control due to this geopolitical relationship that exists. Right. And from a business from a purely business perspective, if you and I were a country and we were, we had an option of the exact same commodity.

00;11;49;12 - 00;12;10;22
Dr. Ryan Loy
Again, this is part of that Pandora's box. We have to assume some things, assuming that the commodity grade is the same, assuming that the quality is the same, everything's the same. Why wouldn't you go for the cheaper option? Right. And that's really where Brazil's at right now. They're going to be that cheaper option, compared to the US.

00;12;10;24 - 00;12;31;25
Dr. Ryan Loy
Another reason is that that strength of the US dollar relative to the Brazilian riyal. So for example, 1 USD is equal to about six Brazilian reals. So what that really means and it's six Brazilian reals at the time of this writing that could change. It changes all the time. However, it's really maintained that six for the least the last few months.

00;12;31;27 - 00;12;59;09
Dr. Ryan Loy
So assuming that trades are settled in in dollars and assuming the same cost of production between Brazilian and US farmers, which I've heard anecdotally that it's cheaper over there, even so, this makes the matter even worse. Brazil really has that opportunity to undercut the price of U.S commodities and continue to capture more of that global share. And by doing that, they're going to be that mechanism for BRICS to get that currency, whatever currency they choose to use out to the world.

00;12;59;11 - 00;13;23;11
Dr. Ryan Loy
And so really, all in all, you know, Brazil is really going to be that main mechanism. Brazil and China are the biggest key players when it comes to this BRICS relationship. And again, Brazil, with that exchange rate as it sits right now with our strong US dollar, there's no incentive for China to go and purchase from us, assuming that quality is the same and the cost of production is same.

00;13;23;11 - 00;13;40;09
Dr. Ryan Loy
Now. Right now there is an issues with quality coming out of Brazil. And so China's kind of, actually hasn't bought soybeans from them, at least the first, the last two months of last year, in the first month of this year, they've been buying from us because they had a quality issue. Now there's a light at the end of the tunnel for us.

00;13;40;09 - 00;13;46;14
Dr. Ryan Loy
At the US, we always know that our quality is probably going to be able to outbid most folks. And so that's going to be kind of our our strength.

00;13;46;15 - 00;13;47;21
Riley Smith
Unless you're talking about rice.

00;13;47;24 - 00;14;14;06
Dr. Ryan Loy
Yeah. Well, you know, we don't have to again part of that Pandora's box right there. And you're right. You're right. So just to kind of in conclusion and to wrap this up, you know, there are still significant challenges and limitations to the BRICS efforts, you know, despite their considerable share of those foreign exchange reserves which are called reserves, the nations have a much smaller footprint, international financial markets compared to the US, which reduces the potential global impact of their efforts in the short term.

00;14;14;10 - 00;14;34;27
Dr. Ryan Loy
Right. We still our superpower, our our kind of unnamed superpower is that dollar, right? We have the dollar and we're willing to kind of have that, that trade deficit, which means that we're going to export you know, more than we are. Excuse me. Vice versa. Ignoring that, I said, the point being is that we have a mechanism.

00;14;35;00 - 00;14;54;14
Dr. Ryan Loy
To get currency out to the world. We have many mechanisms to do it. And so because of that, our footprint is just so much larger than those other countries. Recall that GDP share that I was talking about earlier. When you look at this graph, point being is that those are, you know, that is several countries added together and they're just equaling the US GDP output.

00;14;54;14 - 00;15;17;15
Dr. Ryan Loy
So when we're talking about, you know, this economic powerhouse and, you know, footprint in international markets, the US still has that trust and and everything and still that strength, you know, in other words, you know, government issued debt denoted in USD still dominates those international markets. Right? So that's another big thing. Secondly, BRICS countries are economically diverse and often have different political interests.

00;15;17;17 - 00;15;38;01
Dr. Ryan Loy
This makes their coordinator effort, you know, a challenge since China and Russia will likely, you know, in the long run, act in their own self-interest. And for a common goal in the, you know, in the long run, you know, there's also discussion about creating a common BRICS currency, but that warrants a long term concern. But again, it really, as it stands right now, lacks that global mechanism.

00;15;38;04 - 00;15;57;29
Dr. Ryan Loy
Compared to the US dollar to get out into the hands of people to be used. So overall, you know, these BRICS countries are still actively pursuing those strategies to lessen the dependance on the dollar. You know, while these recent efforts signify a dollarization move, the global dominance of the dollar will likely outweigh the short term efforts.

00;15;57;29 - 00;16;19;21
Dr. Ryan Loy
You know, long term, it's going to be a different story, I think. However, right now, these moves really suggest any shift in this any significant shift in this global trade and any significant shift off of the US dollar will be gradual, as in a very weird way, they have to have the US dollar to get off the US dollar for the time being.

00;16;19;21 - 00;16;26;19
Dr. Ryan Loy
So this is a longer term concern and something to put on the horizon. But in the short term, it's at least worth talking about it.

00;16;26;22 - 00;16;34;00
Riley Smith
Yeah, and from what I'm understanding, it sounds like it'd take a lot of effort to replace the monetary value of what US dollar is.

00;16;34;00 - 00;16;34;23
Dr. Ryan Loy
That's right.

00;16;34;25 - 00;16;42;20
Riley Smith
As much as they're trying to pull together to equal the amount of the monetary value, was it worth is it worth it or not?

00;16;42;21 - 00;17;03;04
Dr. Ryan Loy
Well, one of the things to and this is this is totally not an academic thought, and it's totally not, you know, something that I wrote in here, but, you know, one of the things that I'm thinking of is one of their concerns is, is the stability of the currency. They don't want to use the US dollar anymore because of our monetary policy decisions that we've made to, to, to protect our domestic economy.

00;17;03;04 - 00;17;15;06
Dr. Ryan Loy
Right. However, I mean, I think it's pretty obvious that, you know, China or Russia would manipulate whatever currency they come out with the same way, if not more severe than any other country with.

00;17;15;11 - 00;17;16;08
Riley Smith
Your heavy hitters.

00;17;16;08 - 00;17;30;09
Dr. Ryan Loy
Yeah. So you think about it and it goes, well, you're just kind of replacing one problem with another. And you know, I don't know how much weight that holds. So those are kind of some thoughts on it. And again, you know in a in a in a short version of a podcast, it's difficult to really open this Pandora's box.

00;17;30;09 - 00;17;35;17
Dr. Ryan Loy
But if you have any questions on it, please feel free to reach out to myself or Riley or whoever. And I'd be happy to talk about it.

00;17;35;20 - 00;17;55;06
Riley Smith
I greatly appreciate it. It was very informative. Article. And I, suggest all our listeners to go. If you're not subscribed, as I always say, go subscribe to the newsletter. Read up more about it, get more well versed in BRICS plus and what it is and what it does. And, keep up with that. Dr. Ryan

00;17;55;06 - 00;18;19;16
Riley Smith
Loy, thank you so much for joining me in the studio this morning and for everybody listening. Y'all, please stay tuned for my market report. Thanks. All right, guys, back to the market report. We have changed up or forward contract months. So now we're looking at May May 25 Corn current price is at $4.94 per bushel, a month agos price is at $4.92 per bushel.

00;18;19;16 - 00;18;47;23
Riley Smith
That's up $0.02 and a year agos price was at $4.24 per bushel. That's up $0.70. May 25 Rice current price is at $13.58 per cwt, month agos price is at $14.58 per cwt.. That's down $1 and a year ago prices at $18.36 per cwt. That's down $4.78. May 25 Soybeans current price is at $10.41 per bushel a month agos

00;18;47;26 - 00;19;18;00
Riley Smith
price is at $10.59 per bushel. That's down $0.18. And a year agos, price was at $11.41. That's down a dollar. July 25 Wheat current price is at $5.94 per bushel, month agos price is at $5.62 per bushel. That's at up $0.32. And a year agos price is at $5.86 per bushel. That's up $0.08. May 25 Cotton current price is at $0.67 per pound.

00;19;18;02 - 00;19;41;27
Riley Smith
Month ago prices at $0.68 per pound. That's down $0.01 a year agos prices at $0.99 per pound. That's down $0.32 weekly U.S. average. Peanuts current price is at $486 per ton. month agos price is at $506 per ton. That's down $20 and a year agos price is at five $456 per ton. That's up $30. That's your weekly commodity futures. This week.

00;19;41;29 - 00;20;14;21
Riley Smith
Your input price is this week. Urea is at $539 per ton. Ammonium nitrate is at $539 per ton, ammonium sulfates at $539 per ton DAP is at $753 per ton. Triple Super phosphates at $615 per ton, potash is at $450 per ton, AG LIme is $45 per ton, and pellet lime is $225 a ton. Your diesel prices this week off diesels $2.65 per gallon, highway diesel $3.30 per gallon.

00;20;14;24 - 00;20;29;20
Riley Smith
And your Mississippi River level. Memphis, Tennessee this week. Current levels at 28.7ft and a year agos was at 10.22ft. Want to thank you again for tuning in on another episode markets of Morning Coffee and AG Markets. We hope you enjoyed it and enjoyed you coffee this morning as you tuned into another

00;20;29;20 - 00;20;41;12
Riley Smith
episode. So until next week we'll catch y’all on the flip flop, bye bye now.