WSJMarket Watch:“Record food prices,record metal prices&high oil & you have an inflation firestorm

I was just checking on what the weather was doing to winter wheat crops and this popped up:

www.marketwatch.com... versus-wheat-2011-02-04?pagenumber=2

Economies like Algeria or Rwanda may have to make that tough choice but, for now, China and Brazil aren’t doing that trade off, he said.

China and Brazil “seem happier to use their bounty of liquidity to indulge in inflation, which partly helps to cover the price rises,” he said. “So much of the metals are going into infrastructure in the BRICs that the decision on ‘wheat vs. copper’ is not being made by consumers, but by governments.”

That may soon change.

“Record food prices create social unrest and inflation because they impact the poor most,” said William Gamble, president of Emerging Market Strategies. “Many countries will use price controls, export restrictions, panic buying and subsidies — all of which makes the inflation problem worse.”

“Add in record metal prices and high oil and you have an inflation fire storm,” he said.

And government policies to offset that inflation will be unsustainable, he said.

“Eventually the market reasserts itself and the bubble along with demand for industrial metals collapses.”

I found the casual tone rather creepy.

Anyway:

businessspectator.... mobi/bs.nsf/Article/WRAPUP-7-Food-costs-at-records-UN-warns-of-volatil-DR3N2?OpenDocument&hp17

Reuters

MILAN/WASHINGTON - Global food prices tracked by a UN agency hit their highest level on record in January, a problem set to worsen after a massive snowstorm in the United States and floods in Australia.

The United Nations said on Thursday its Food and Agriculture Organisation Food Price Index rose for the seventh month in a row to reach 231 in January, topping the peak of 224.1 last seen in June 2008. It is the highest level the index has reached since records began in 1990.

"These high prices are likely to persist in the months to come," FAO economist and grains expert Abdolreza Abbassian said in a statement.

Wheat underscored the problem affecting commodity prices around the world, settling on Thursday slightly lower after hitting a 2-½ year high earlier in the day. Corn and soybeans, which also have been hovering near long-term highs, also declined.

www.canadianbusiness.com... ?content=D9L5B4PO1

BELLE PLAINE, Kan. (AP) - An arctic blast that brought subzero temperatures and punishing winds across the Kansas plains has raised new fears for the already drought-stressed winter wheat crop.

The storm dropped massive amounts of snow in eastern Kansas but offered little moisture in the parched western counties where the bulk of the wheat is grown.

Without a protective snow cover the crop is especially vulnerable to frigid temperatures that have settled across the state, experts say. Western Kansas counties only got about an inch of dry, powdery snow — too little to replenish depleted soil moisture the plants will need when they break dormancy in the spring or to even plant another crop then.

The full extent of winterkill and wind damage won't be known until spring when plants green up, said Kansas State University wheat specialist Jim Shroyer...About 37 percent of the winter wheat crop in Kansas was in poor to very poor condition late last month, Kansas Agricultural Statistics Service reported on Monday. About 36 percent was in fair condition with 25 percent rated as good and just 2 percent excellent.

The agency also reported that topsoil moisture was short to very short in 59 percent of the state as of Sunday.

"The final impact remains to be seen, but it does raise fears," said Dan O'Brien, a Kansas State University economist. "We had concerns about the viability of a good number of acres of wheat before this storm came."

www.agriculture.com... -10_11-ar14402

CHICAGO (Dow Jones)--Export demand and concerns about planting have pushed U.S. cash prices for hard red spring wheat above $10 a bushel for the first time in 31 months.

Demand for spring wheat, a high-protein variety grown in northern Plains states like North Dakota, has been strong after rains lowered the quality of wheat in Canada and Australia. Traders are worried wet weather may prevent farmers from planting a big crop this spring to replenish supplies because heavy snows could lead to flooding and saturated soils.

"Rivers and streams are still running full. It could be a mess," said Mike Krueger, president of the Money Farm, a grain marketing advisory service near Fargo, N.D.

National cash price indexes maintained at the Minneapolis Grain Exchange last traded at $10.05 1/2 a bushel for hard red spring wheat, reflecting an average basis of -4 3/4 cents relative to Wednesday's settlement of the MGE hard red spring wheat futures contract. The average cash price jumped from $9.77 a day earlier.

Stock up while you can.

Springtime will not be fun this year...lots of municipalities are already broke dealing with winter's effects, and it won't take a lot to trigger a general collapse.

It is interesting to hear some of this inflation is international, most countries run at a few percent each year. Here is a thread on US inflation www.abovetopsecret.com... . As for the fall in price for Soy and corn, most likely due to being GM crops that no one really wants. Monsanto employees don't eat their own crap and a lot of science is building on the negative health effects.

World oil production is in decline, and the governments of the world are in denial. Saudi oil production as declined by 13.5% since 2005. Chances are that the decline in Saudi Oil production will be more rapid than the U.S. decline, because the technology to extend oil wells has been used in SA for some time now.

Apparently the Germans did a study, that has yet to be published, but some of the conclusions have gotten out.

www.spiegel.de...

The authors paint a bleak picture of the consequences resulting from a shortage of petroleum. As the transportation of goods depends on crude oil, international trade could be subject to colossal tax hikes. "Shortages in the supply of vital goods could arise" as a result, for example in food supplies. Oil is used directly or indirectly in the production of 95 percent of all industrial goods. Price shocks could therefore be seen in almost any industry and throughout all stages of the industrial supply chain. "In the medium term the global economic system and every market-oriented national economy would collapse."

The silver lining is that the cost of importing goods from third world countries with extremely low labor costs, will increase, which will be good for local workers. Alternative energy sources are available, but they will be much more labor intensive, so once again, this is good news for workers,.

reply to post by poet1b


You know why there is a shortage in oil?

Not one permit has been given in over 9 months in the US.

The Obama admin has not allowed one new oil exploration in that time frame.

I would venture to guess that the same could be said of natural gas and coal. I have seen two reports on a new coal mine and a natural gas retrieval denial. Hmmm, I guess the US does not need energy anymore.

Tell me, what is familiar to what is going on now and other socialist systems of the past? Governments do not care about food and energy for the masses. Cannot wait to see what this year brings. People had better been preparing.

And you saying that higher energy costs and higher food costs is ignorant to the extreme. Are you REALLY going to tell me that food shortages is GOOD? WOW.

reply to post by saltheart foamfollower


G of M oil production has been in decline for decades, and further poorly planned deep water wells is not going to make an impact, nor are the highly polluting NG wells. You are clutching at straws. Blaming Obama is embracing denial.

I said silver lining, big difference. Solutions to our current crisis are available. The reality is our economic downturn is a result of supply exceeding demand, which is completely backwards.

Read up on how Cuba adapted after the USSR collapse, and the whole Soviet set up failed factory farming processes shut down. The Cubans were starving, but necessity is the mother of invention. They learned organic farming techniques, and are now doing quite well, and in fact farmers in Cuba are making good money.

The crisis is coming, but we will adapt, and we will be better off for it.

reply to post by poet1b


You mention the USSR, what was the compelling relationship between them and us right now? Do you know? Huge farms and operations. That is the relevant component. The US instituting regs that are squeezing out the innovative smaller operations for the bigger entrenched monstrosities is the problem.

Boy, you like to move the goal post. As far as your change of debate in regards to saying that increased costs of energy will help, I watched a little of Kudlow and his merry bunch of morons on CNBC today. You did not happen to get any of your talking points from them did you?

As far as oil and our natural resources, I guess Obama blocking now for 9 months not ONE PERMIT to drill, would do nothing to the price of energy costs huh? What kind of lala land are you living in?

We have enough energy reserves in the states to last us 200 years. But the environment wackos and the government are making it darn near impossible to use our very own resources. But hey, keep listening to ether, it whispers sweet nothings.

It is purposeful that we are not allowed to use our own resources, if you have not figured THAT out yet, you really need some help.

reply to post by saltheart foamfollower

Huge farms and operations. That is the relevant component. The US instituting regs that are squeezing out the innovative smaller operations for the bigger entrenched monstrosities is the problem.

That is exactly my point, except it isn't government regs creating this situation, it is the corporations that conveniently set up farming methods similar to communism, which is because the free market concept is just a different form of communism. It is all part of the plan, the way corporations have squeezed out the family farms.

What the Cubans found is that using organic farming methods you can produce a lot of food in a small area.

I don't watch network news. Most of it is garbage.

I didn't say increased cost of energy will help, I said that alternative energy sources will be far more difficult for the huge corporations, that are our real problem, to control. Everything the corporations do is to extend their power and influence over the average person.

You really should stop listening to these propagandists on the right wing talk shows. They are poisoning your mind.

We have enough energy reserves in the states to last us 200 years. But the environment wackos and the government are making it darn near impossible to use our very own resources. But hey, keep listening to ether, it whispers sweet nothings.

It is purposeful that we are not allowed to use our own resources, if you have not figured THAT out yet, you really need some help.

I figured that out long ago, but it is not the environmentalists, or the government preventing us from harnessing cheaper more efficient sources of energy, but the oil corporations. The banking/oil cartel is the biggest obstacle to the development of renewable ,more efficient energy solutions, because these alternatives are more labor intensive (which has been my consistent point), like the old family farms, and will not be so easily controlled.

I know you can see this my giant friend.j

reply to post by apacheman


at the very least im expanding my garden. at this point the only question is, given current economic/currency trends, how could there not be some level of shortage or collapse? no one in charge has implimented any sort of plan that allows for long term success at our current standard.

Sri Lanka will lose over one million tons from its upcoming paddy harvest due to recent flooding, officials say.

"We expected a yield of around 2.75 million metric tons from the harvest due in March to April," Kulugammanne Karunathileke, secretary to the Ministry of Agriculture, told IRIN. "After the heavy rains we will only get around 1.75 million."

Karunathileke, the highest ranking official at the ministry, said the country had expected a bumper crop - until flooding, which began in January, left some paddy fields under water for up to 11 days. The worst-hit areas are in the eastern districts of Ampara, Batticaloa, Polonnaruwa, Trincomalee and the north-central district of Anuradhapura.

Together they account for over 1.2m tons of the harvest.

Of the over 700,000 hectares cultivated this season, more than 200,000 have been destroyed, Karunathileke said.

Rice experts warn that yields will probably also be low in areas not directly affected by the flooding.

"The indirect damage is the spread of fungal diseases that will cause the harvest to drop even in areas outside the flood zones," Nimal Dissanayake, director of the Rice Research and Development Institute (RRDI), said.

www.sott.net... -Floods-destroy-over-a-third-of-rice-harvest

Feb. 15 (Bloomberg) -- Corn may surge to a record in the first half and be the best-performing agricultural commodity as increased government purchases help to "inflame" the market, according to Agrocorp International Pte.

"Corn is where demand is most imbalanced" against supply, said Managing Director Vijay Iyengar, who's traded agricultural commodities since 1986. Corn reached an all-time high of $7.9925 a bushel in June 2008 and would need to rise more than 13 percent from yesterday's close to exceed that level.

Agrocorp joins Rabobank International and Blackstone Group LP's Byron Wien in forecasting corn at a record in 2011 as demand gains and global stockpiles decline. Corn has surged 90 percent over the past year, beating rallies in wheat and soybeans and contributing to accelerating global food inflation.

www.sf... gate.com/cgi-bin/article.cgi?f=%2Fg%2Fa%2F2011%2F02%2F14%2Fbloomberg1376-LGMX110UQVI901-1IUU9U1RN2KE66N2QV3DTTJ9DG.DTL

OTTAWA — Wheat prices hit a 30-month high Monday on weather worries and increased demand from the politically volatile Middle East and North Africa, with one analyst suggesting China’s massive stockpile of grains has become an “aggravating concern” in the global food market.

The continued upward pressure on food prices — which helped trigger the upheaval in Egypt — could become a hot political issue, starting this week in Paris as Group of 20 finance ministers and central bankers gather. As head of the G20 this year, France wants policymakers to tackle the issue of taming commodity prices.

“When food is scarce in the world, food becomes more important than money,” said Carl Weinberg, chief economist at High Frequency Economics of Valhalla, N.Y.

Wheat futures surged in trading on the Chicago Board of Trade to a high last seen in August 2008. Dry weather in key growing parts of China and the United States was one concern. But so was increased demand, as Tunisia and Iraq placed orders for U.S. wheat — in an effort to ward off citizen unrest — and Afghanistan said it would place a 200,000-tonne order in the next few months.

www.financialpost.com... s+help+lift+wheat/4281642/story.html

One thing about foodstuff commodities is that they are not cheap to store (cost of storage and eventual spoilage) and when prices are high then producers (farmers) will plant more (as is possible) in some cases "buying acres" from competing crops (ie, corn from soybeans). In the case of wheat....it is basically a harvestable grass that will grow virtually anywhere (almost like a weed). Assuming we dont get back to back weather problems throughout the world (ie, heat wave/drought in Russia & flooding in Australia) then we should get a big wheat crop next year.
At least we can hope so.....poorer countries in Asia need a big rice crop also to keep the peace.