The Day They Burned the Price Chopper

Filed in BP, commodities, currencies, Ford, Gold, GOld juniors, Gold Market, inflation, o, target by on January 17, 2011 0 Comments

There are food riots going on around the world. People are burning stores in India, Chili, China, Egypt, and Algeria. One man was forced to stop selling fruit along a Tunisian roadside because he didn’t have a permit. When he lit himself on fire, the ensuing riots ended a multi-decade-long dictatorship. People will put up with a lot — corruption, nepotism, cruel laws, and barbaric prisons — but they tend to lose it when they can’t afford food. This is especially true when they blame the ruling class for their misery… Food riots have ended reigns in France, Russia, and British India. Today the Egyptian stock market sold off on fears the riots might spread. Food prices hit fresh highs According to the UN’s Food and Agricultural Organization (FAO), its food price index hit a new high above the previous record in 2008. Soaring sugar, cereal, and oil seed prices were the main drivers. In one month— from November to December — sugar was up 6.7%, cereals were up 6.4%, and oils were up 8%. This is on top of a relentless 80% climb in prices over the past ten years. Wheat, in particular, has been hit hard. Wildfires in Russia shut down 11% of global exports from the country. Add to this the recent floods in Australia, which also makes up 11% of global exports, and you start to have a real problem… In the United States, the limit for corn-based ethanol has been raised, which drove up the price of cereal. There were also La Nia-driven droughts in Argentina, the second biggest exporter of corn after the U.S. If we get one more natural disaster — say, the Mississippi River has another hundred-year flood — the world would be in serious trouble. Food inflation: Wheat 10-year chart The forecast for 2011 is too early to tell with any clarity, but most of what I’ve been reading is that the world’s supply and demand balance for cereals is expected to tighten, with total consumption eclipsing world production for 2010/2011. This will require a six percent dip into stockpiles. ~~SIGNUP_WD~~ Hoarding The real worry is hoarding. When countries start to shut down exports — like Russia did after its historic fires, or India, Bangladesh, and others did in 2008 — those who need to buy agricultural commodities will chase the price higher. You will see the results on your store shelves. Here is a chart that shows U.S. food stamp participation: As you can tell, it’s been a hard…

Visit link:
The Day They Burned the Price Chopper

Tags: , , , , , , , , , ,

About the Author ()

Leave a Reply

Your email address will not be published. Required fields are marked *