Best of the Week
Most Popular
1. Crude Oil and Water: How Climate Change is Threatening our Two Most Precious Commodities - Richard_Mills
2.The Potential $54 Trillion Cost Of The Fed's Planned Interest Rate Increases - Dan_Amerman
3.Best Cash ISA Savings for Rising UK Interest Rates and High Inflation - March 2018 - Nadeem_Walayat
4.Fed Interest Hikes, US Dollar, and Gold - Zeal_LLC
5.What Happens Next after February’s Stock Market Selloff - Troy_Bombardia
6.The 'Beast from the East' UK Extreme Snow Weather - Sheffield Day 2 - N_Walayat
7.Currencies Will Be ‘Flushed Down the Toilet’ Triggering a ‘Mad Rush into Gold’ - MoneyMetals
8.Significant Decline In Stocks On The Cards! -Enda_Glynn
9.Land Rover Discovery Sport Extreme Driving "Beast from the East" Snow Weather Test - N_Walayat
10.SILVER Large Specualtors Net Short Position 15 Year Anniversary - Clive_Maund
Last 7 days
A Strong Economy and Weak Stock Market is Bullish for Stocks - 22nd Mar 18
Fed Raises US Interest Rates 25bp – Where Are We In The Stock Market Cycle? - 22nd Mar 18
Why Spotify Will Likely Surge During Its IPO - 22nd Mar 18
Facebook: The Anti-Social Network Covert Data Gathering - 21st Mar 18
Additional Signs for Gold and Silver Amid Increasing FOMC Tension - 21st Mar 18
Credit Concerns In U.S. Growing As LIBOR OIS Surges to 2009 High - 21st Mar 18
Stock Markets Are Flat-to-lower Before the FOMC - 21st Mar 18
Will Powell’s Actions Pop Stock Market Perfection - 21st Mar 18
Economic Moral Hazards of the International Criminal Court - and Philippines Withdrawal - 21st Mar 18
Larry Kudlow vs. Vladimir Putin on Gold - 21st Mar 18
Trump Builds Economy and War Machine - 21st Mar 18
This Stock Market "Illusion" Can Destroy Once-Vibrant Portfolios - 21st Mar 18
Gold Short-term Pull Back in Progress - 20th Mar 18
Stocks Appear to be Under Pressure - 20th Mar 18
Time To Eliminate Your Wall Street Tax? - 20th Mar 18
The Beast from the East Snow, UK Roads Driving Car Accidents - 20th Mar 18
Can Bitcoin Price Rally Continue After Paypal Fake FUD Attack? - 19th Mar 18
2018 Reversal Dates for Gold, Silver and Gold Stocks - 19th Mar 18
This Tech Breakthrough Could Save The Electric Car Market - 19th Mar 18
Stocks Set to Open Lower, Should You Buy? - 19th Mar 18
The Wealth Machine That Rising Interest Rates Create Conflict With The National Debt - 19th Mar 18
Affiliate Marketing Tips and Network Recommendations - 19th Mar 18
Do Stocks Bull Market Tops Need Breadth Divergences? - 19th Mar 18
Doritos Instant £500 Win! Why Super Market Shelves are Empty - 19th Mar 18
Bonds, Inflation & the Market Amigos - 19th Mar 18
US Housing Real Estate Market and Banking Pressures Are Building - 19th Mar 18
Stock Market Bulls Last Stand? - 18th Mar 18
Putin Flip-Flops Like A Drunken Whore On Bitcoin Cryptocurrency Legalization - 18th Mar 18
How to Legally Manipulate Interest Rates - 18th Mar 18
Return of Stock Market Volatility Amidst Political Chaos and Uncertain Economy - 18th Mar 18
Bitcoin Price Trend Forecast, Paypal FUD Fake Cryptocurrency Warning - 17th Mar 18
Strong Earnings Growth is Bullish for Stocks - 17th Mar 18
The War on the Post Office - 17th Mar 18
GDX Gold Mining Stocks Fundamentals - 16th Mar 18
Nationalism, Not the Russians, got Trump Elected - 16th Mar 18
Has Bitcoin Bought It? - 16th Mar 18
Crude Oil Price – Who Wants the Triangle? - 16th Mar 18
PayPal Cease Trading Crypto Currency Bitcoin Warning Email Sophisticated Fake Scam? - 16th Mar 18
EUR/USD – Something Old, Something New and… Something Blue - 16th Mar 18

Market Oracle FREE Newsletter

Urgent Stock Market Message

Agri-Food Price Index Makes New High!

Commodities / Agricultural Commodities Sep 04, 2010 - 05:16 AM GMT

By: Ned_W_Schmidt


Best Financial Markets Analysis ArticleOne road to wealth is to only own those assets for which the price is rising. That seems to be a rule that equity investors have forgotten. In any event, a great market technician once suggested only looking at those things with prices making new 52-week highs. His reasoning was that for the price of something to rise it must eventually make a new high. Well, based on the above chart, that technician would be all over Agri-Food commodities and associated investments. Our Agri-Food Price Index recently made a new high!

Recent embargo of grain exports by Russia due to problems with their wheat crops has served to highlight the tenuous nature of the world's Agri-Food situation. Cessation of Russian exports did not cause prices to rise. It just helped to uncap them. The fundamental Agri-Food shortage facing the world did not suddenly arise. It has been building for years.

List of countries that cannot feed their people is not a short one. Included in it are all the nations of the Middle East, Egypt, India, China, Philippines, etc. With prosperity beginning to arise in China and on its way in India, these two nations will increasingly turn to global markets to feed their citizens. They have no choice, as they lack the land and all-important water to feed their people. In the global game of Agri-Food, those nations that bid the highest will get the food.

If one reads the commentaries or listens to traders, the discussion still drones on about absolute size of grain reserves in the world. And yes, they are sizable. That view, however, focuses on a meaningless metric. Gasoline stocks today are many times the size that existed when this author was a teenage driver. We are not, however, paying 19 cents a gallon for gasoline. For what matters is not the size of the reserves, but those reserves relative to consumption.

In our first chart this week, above, is plotted the days of consumption held in global reserves for the Big Four, corn, soybeans, wheat, and rice. They all fall into a range of 60-95 days. If no production of these grains occurred, in less than 60 days no corn would be available. In the case of rice, in less than 80 days none would be found.

Numbers in that chart do not portray a picture of overwhelming bounty. Such is the reason that global grain markets responded to the Russian announcement. At the same time, the world has really not yet come to know the impact of the floods on Pakistani rice production. That country is the number three exporter of rice.

New 90-week high about to happen?

When Agri-Food is short in supply anywhere, the world turns to North America. Per the latest USDA report, U.S. wheat export sales are running 60+% ahead of a year ago. For rice, the same number rounds to being up 30%. Those sales are tightening the prices of all grains, such as corn in the above chart.

Corn has not yet risen to a new 90-week high, but it is well on its way to doing so. China, long a net importer of soybeans, is now moving to becoming a net importer of corn. That importation takes two forms, physical corn and dry distillers grain. Latter is a byproduct of ethanol production. Essence of the problem for China is that it lacks the water to grow sufficient corn. Importing corn is the importation of "virtual water."

When corn is $11 a bushel, who will benefit from it? Will your wealth? Two good ways exist to participate in the tightening of the global Agri-Food markets. One is through stocks of those companies that serve the global Agri-Food market. Second is through investment in Agri-Land. For those that might think in terms of the latter, our 4th Annual U.S. Agricultural Land As An Investment Portfolio Consideration - 2010 will soon be available at our web site. This report is the definitive annual study of the returns earned on U.S. agricultural land.

By Ned W Schmidt CFA, CEBS

AGRI-FOOD THOUGHTS is from Ned W. Schmidt,CFA,CEBS, publisher of The Agri-Food Value View, a monthly exploration of the Agri-Food grand cycle being created by China, India, and Eco-energy. To contract Ned or to learn more, use this link:

Copyright © 2010 Ned W. Schmidt - All Rights Reserved

Ned W Schmidt Archive

© 2005-2018 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules