Best of the Week
Most Popular
1.Putin’s World: Why Russia’s Showdown with the West Will Worsen - John_Mauldin
2. Stocks Bull Market Grinds Bears into Dust, Is Santa Rally Sustainable? - Nadeem_Walayat
3. Gold and Silver 2015 Trend Forecasts, Prices to Go BOOM - Austin_Galt
4.Gold Price Golden Bottom? - Toby_Connor
5.Gold Price and Miners Soar on Huge Volume - P_Radomski_CFA
6.Stock Market and the Jaws of Life or Death? - Rambus_Chartology
7.Gold Price 2015 - EWI
8.Manipulated Stock Market Short Squeezes to Another All Time High - The China Syndrome - Nadeem_Walayat
9.Gold, Silver, Crude and S&P Ending Wedge Patterns - DeviantInvestor
10.Is the Gold And Silver Golden Rule Broken? - Michael_Noonan
Last 5 days
All Hail the King U.S. Dollar - Trend Forecast - 24th Nov 14
Where Is China Economy On The Map Exactly? - 24th Nov 14
Most of The World Economies Panic - Is The US Next? - 24th Nov 14
Stock Market Exhaustion Gap? - 24th Nov 14
Gold Golden Gains Come After The Pain - 24th Nov 14
Crude Oil and Stock Market Setting The Stage For The Next Recession - 23rd Nov 14
This Publicly-Owned Bank Is Outperforming Wall Street - 23rd Nov 14
Who’s Ready For $30 Crude Oil Price? - 23rd Nov 14
Strategic, Methodological and Developmental Importance of Knowledge Consumption - 23rd Nov 14
Manipulated Stock Market Short Squeezes to Another All Time High - The China Syndrome - 23rd Nov 14
Gold Price 2015 - 22nd Nov 14
Stock Market Medium Term Top? - 22nd Nov 14
Is the Gold And Silver Golden Rule Broken? - 22nd Nov 14
Malaysia's Subsidy and Budget Deficit Conundrum - 22nd Nov 14
Investors Hated Gold at Precisely the Wrong Time: What About Now? - 22nd Nov 14
Gold and GLD ETF Selloff - 22nd Nov 14
Currency Wars, the Ruble and Keynes - 21st Nov 14
Stock Market Investor Sentiment in The Balance - 21st Nov 14
Two Biotech Stocks Set to Double on One Powerful Catalyst - 21st Nov 14
Swiss Gold Poll Likely Tighter Than Polls Suggest - 21st Nov 14
Gold's Volatility and Other Things to Watch - 21st Nov 14
Australia Stock Market and AUD Dollar Analysis (ASX200 and AUDUSD) - 21st Nov 14
New Algae Research May Have Uncovered an “Energy Forest” Under the Sea - 21st Nov 14
The Cultural and Political Consequences of Fiat Money - 20th Nov 14
United States Social Crisis - No One Told You When to Run, You Missed the Starting Gun! - 20th Nov 14
Euro-Zone Tooth Fairy Economics, Spain Needs to leave the Euro - 20th Nov 14
Ebola Threat Remains a Risk - New Deaths in Nebraska and New York - 20th Nov 14
Stock Market and the Jaws of Life or Death? - 20th Nov 14
Putin’s World: Why Russia’s Showdown with the West Will Worsen - 20th Nov 14
Making Money While The World Burns - 20th Nov 14
Why This "Quiet Zone" Is Now Tech Stocks Biggest Profit Sector - 20th Nov 14
My Favorite Stock McDonalds Just Got Kicked Off My “Buy” List - 19th Nov 14
European Economies in Perpetual State of Shock, What's Scarier Than Deflation? - 19th Nov 14
Breakfast with a Lord of War and Nuclear Weapons - 19th Nov 14
The U.S. Economy’s Ebb and Flow - 19th Nov 14
What You Need to Know Before Investing in Alibaba - 19th Nov 14
Forget About Crude Oil Price Testing 2009 Low - 19th Nov 14
What Blows Up First? Part 5: Shale Oil Junk Bonds - 19th Nov 14
Bitcoin Price Did We Just See an Important Slump? - 18th Nov 14
How to Profit From Oversold Crude Oil Price - 18th Nov 14
Stock Valuations Outrunning Profits Growth - And the Band Played On - 18th Nov 14
ECB Buy Gold Bullion? Japan's Monetary Policy Dubbed "Ponzi Scheme" - 18th Nov 14
Gold, Silver, Crude and S&P Ending Wedge Patterns - 18th Nov 14
How High Could USD/JPY Go? - 18th Nov 14
On Obama and the Nature of Failed Presidencies - 18th Nov 14
Globalism Free Trade Immigration Connection - 18th Nov 14
An Epiphany From Hell - Buy Gold and Silver - 18th Nov 14
Too Difficult to Get a U.S. Home Loan - 18th Nov 14
Has the Gold Bear Trap Been Set - 18th Nov 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Gold Report 2015

China Drought Global Food Crisis to Trigger Many More Egypts

Commodities / Food Crisis Feb 10, 2011 - 06:14 AM GMT

By: Justin_John

Commodities

Diamond Rated - Best Financial Markets Analysis ArticleThe Chinese government has reportedly decided to spend $1 billion to battle the drought plaguing huge areas in the north, as wheat prices continued their climb and the UN warned of serious consequences for the winter harvest.

The drought is the worst in six decades in many areas, and has left a swathe of grain-producing regions reeling from a lack of any significant rainfall in more than three months.


The money will be spent to divert water to affected areas, construct emergency wells and irrigation facilities, and take other measures, the State Council, or the Cabinet, said in a statement on Wednesday after an executive meeting chaired by Premier Wen Jiabao.

The move was included in a 10-measure package to spur grain production and tackle the persisting drought, which poses a grave threat to wheat production.

The worst affected areas are shown below:

Eight major grain-producing provinces, including Shandong, Jiangsu, Henan, Hebei and Shanxi, have been affected. Together they produce more than 80 percent of China’s winter wheat. By Wednesday, a total of 7.8 million hectares of winter wheat had been affected by the drought in the eight provinces, accounting for 42.4 percent of their total wheat-sown area, according to the Ministry of Agriculture.

The State Council warned the situation could worsen, saying rainfall across northern China for the foreseeable future would remain “persistently below normal levels and major rivers will continue to be generally dry”. Some 2.57 million people and 2.79 million livestock are suffering from drinking water shortages, official figures showed. The UN’s Food and Agriculture Organization (FAO) also issued a warning on Tuesday over the impact on the winter wheat crop.

The situation in the regions could become critical if temperatures dropped further this month and a spring drought followed the winter one, the FAO said. Footage from CCTV on Wednesday showed withered crops in parched farmland in Shandong. Wheat prices in China have also been rising rapidly in the last few months. Average flour prices in the country rose more than 8 percent in January from the previous two months, the FAO said.

Wheat Prices on the boil here:

Wheat futures have started to rise and a near 50,000 long positions have been built up which is a 6 monthly high. Refer our post : Food inflation: The story of 2011 where we analysed that Wheat will retrace and touch 1300 once again. The fundamentals drivers behind Wheat are very strong and will drive prices.

Refer our previous articles on food inflation where we have dealt with Wheat futures, below:

The coming shock

Food inflation: The story of 2011

Rice: Ready for a move

Rice Charts: Rise looking imminent

Rice has been a major worry as prices have expanded triggered by short supply from Brazil and South East Asia. COT position imply rising trader position for a rise in prices. FAO recently has though opined that there has been a moderation in prices in January but it can be attributed to a mere consolidation before further rise

All Rice index has marginally corrected to 253 in Jan 2011 from 256 in Dec 2010 but we expect 290 levels in 2011.

Egypt was all about food prices

Political unrest has broken out in Tunisia, Yemen, Egypt and other Arab countries and the underlying reasons for it has been the rising food prices. The Food and Agriculture Organization of the United Nations says its global food price index is at a record high, above even where it stood during the last food crisis three years ago.

Rising prices are “leading to riots, demonstrations and political instability,” New York University economics professor Nouriel Roubini said during a panel discussion. “It’s really something that can topple regimes, as we have seen in the Middle East.”

While traditionally, food-price crisis reflects the simple law of supply and demand. The supply of food has been diminished by bad weather in many crucial crop-growing areas of the world. Russia, Ukraine and Argentina have had severe droughts, while Pakistan and Australia have had massive flooding. This when combined with the fact that demand has been growing in south asia, have let food prices rise. Adding fuel to fire has been the US FED which with their ultra loose monetary policies have allowed capital to flood the markets allowing food and all commodities priced in dollar to be rising in prices.

In the long run, economists say the only real solution will be to increase the supply of affordable food.

Will China spur another Egypt? This time in US?

Given the drought in China, Chinese authorities are then planning to import Wheat and Rice to feed its billions. China has the purchasing power and can move in fast to deplete world supply in a very short period of time. This will act like dynamite to volatile food trading market which can potentially rise very fast.

Expect further traction in food prices in 2011 and 2012 even with FAO suggesting higher Wheat and Rice production.

More than 41 million US citizens depend on food stamps which is nearly 12% of the population of the country.

A staggering 42,389,619 now use food stamps, up 58.5 percent from August 2007, according to U.S. Department of Agriculture data from August.

The findings translate into nearly 14 percent of American households are still relying on government assistance to buy food as the economy continues to falter. The total was up 1.3 percent from July.

A historical on US food stamps:

The demand for food stamps is expected to remain high throughout the country as the unemployment rate hovers near 9 percent in 2011, gradually falling to 8.2 percent by late 2012 and reaching the “natural rate” of 5.3 percent only in 2016, according to the Congressional Budget Office.

With rising prices, the numbers on food stamps are only going to rise and forcing government to procure even more. Only a matter of time before we see the system break and riots to break out in the US. A Greece and an Egypt are going to come to the US. While Greece represents the debt rollover issue while Egypt will be the citizens revolt against a wild and mediocre government.

Source: http://dawnwires.com/investment-news/china-drought-will-this-be-the-next-trigger-for-more-egypts/

By Justin John

http://dawnwires.com

Justin John writes for DawnWires.com and is a Director at a European Hedge Fund.

© 2011 Copyright Justin John - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2014 http://www.MarketOracle.co.uk - 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

Free Report - Financial Markets 2014