Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Investing in the Tulip Crypto Mania 2021 - 19th Jun 21
Here’s Why Historic US Housing Market Boom Can Continue - 19th Jun 21
Cryptos: What the "Bizarre" World of Non-Fungible Tokens May Be Signaling - 19th Jun 21
Hyperinflationary Expectations: Reflections on Cryptocurrency and the Markets - 19th Jun 21
Gold Prices Investors beat Central Banks and Jewelry, as having the most Impact - 18th Jun 21
Has the Dust Settled After Fed Day? Not Just Yet - 18th Jun 21
Gold Asks: Will the Economic Boom Continue? - 18th Jun 21
STABLE COINS PONZI Crypto SCAM WARNING! Iron Titan CRASH to ZERO! Exit USDT While You Can! - 18th Jun 21
FOMC Surprise Takeaways - 18th Jun 21
Youtube Upload Stuck at 0% QUICK FIXES Solutions Tutorial - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations Video - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations and Trend Analysis into Market Correction - 17th Jun 21
Stocks, Gold, Silver Markets Inflation Tipping Point - 17th Jun 21
Letting Yourself Relax with Activities That You Might Not Have Considered - 17th Jun 21
RAMPANT MONEY PRINTING INFLATION BIG PICTURE! - 16th Jun 21
The Federal Reserve and Inflation - 16th Jun 21
Inflation Soars 5%! Will Gold Skyrocket? - 16th Jun 21
Stock Market Sentiment Speaks: Inflation Is For Fools - 16th Jun 21
Four News Events That Could Drive Gold Bullion Demand - 16th Jun 21
5 ways that crypto is changing the face of online casinos - 16th Jun 21
Transitory Inflation Debate - 15th Jun 21
USDX: The Cleanest Shirt Among the Dirty Laundry - 15th Jun 21
Inflation and Stock Market SPX Record Highs. PPI, FOMC Meeting in Focus - 15th Jun 21
Stock Market SPX 4310 Right Around the Corner! - 15th Jun 21
AI Stocks Strength vs Weakness - Why Selling Google or Facebook is a Big Mistake! - 14th Jun 21
The Bitcoin Crime Wave Hits - 14th Jun 21
Gold Time for Consolidation and Lower Volatility - 14th Jun 21
More Banks & Investors Are NOT Believing Fed Propaganda - 14th Jun 21
Market Inflation Bets – Squaring or Not - 14th Jun 21
Is Gold Really an Inflation Hedge? - 14th Jun 21
The FED Holds the Market. How Long Will It Last? - 14th Jun 21
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Agri-Food's Impact From Russia's Worst Drought in a Decade

Commodities / Agricultural Commodities Jul 15, 2010 - 10:30 AM GMT

By: Ned_W_Schmidt

Commodities

Best Financial Markets Analysis ArticleLast we talked was how pigs were being made into bacon in the markets for oats. Many at that time perhaps did not realize that both a cash and futures market existed for their oats. In that discussion we noted that a goodly reason the back of the bear run in oats was broken was too much rain in Canada. Weather, it seems, has a way of ignoring the forecasts of analysts and traders. Those lost oats, and other grains, in Canada, will indeed be made up, NEXT YEAR. Agri-Foods are not produced in factories.


Around the globe in Russia, the weather is playing another nasty trick on the grain bears. Bloomberg.com, 12 July, reports, “
“Russia’s worst drought in a decade has damaged more than half of grain planted in 11 regions and hot, dry weather may continue for the rest of this month, . . . ‘We don’t see much room for improvement in July,’ said Anna Strashnaya, head of agro-meteorological forecasts. . .Soil drought has affected more than half of grain plantings in 11 regions along the Volga, in the Urals and central Russia, and yields in these areas will be at least 30 percent less than last year, the service(Federal Hydrometeorological Service) said on its website late July 9.”

Official forecast for Russian grain production this year has been reduced to 85 million metric tons. Last year Russia produced 97 million metric tons.  A 12+% fall in grain production in one of the largest grain producing regions is significant.

Above chart portrays U.S. cash wheat prices for the past 90 weeks. As indicated by the rectangle,  wheat has been under a bear raid for months. Claiming that the world wheat supply was overwhelming, though we know that not true, traders pushed wheat price down in regular fashion. They shorted every rally. That strategy worked fine until the reports on weather in Canada, wet, and in Russia, dry, came out.

A move to $7 on U.S. cash wheat in the next six months is conceivable. Remember that the North American winter wheat crop has been harvested. Wheat plantings this spring in the U.S. were at multi decade lows, and will likely remain so until wheat prices are materially higher. And the next U.S. winter wheat crop? In 2011. Wheat is not made in a factory.

Action in oats, wheat, etc. have enabled the Agri-Food Price Index, shown in above chart, to move to a new cycle high. Wheat is the first of the Big Four to move out of the bear pattern. With China now a net importer of corn, that grain is building  in that direction. Soybeans have already discovered a floor that will like persist as 70+% of the new Brazilian crop has already been sold. Only rice of the Big Four has yet to show signs of the breaking the bear raid.

While we have here talked mainly about grains, keep in mind that global meat markets are too feeling the demand pressure of a world becoming richer. The UN FAO Meat Price Index in June was less than 1% below the all time high. As meat prices continue to rise due to increasing demand from the growing global middle class, grain prices will follow. As we have noted before, neither meat nor any other Agri-Food is made in a factory.

As nations become richer, such as happening in China, nations import their food needs and wants, as noted by Commodity News for Tomorrow, 

“Japan, the world's second-largest economy, now produces only 40% of its food and buys almost all its wheat, corn and soy beans from overseas.(14 July 2010)”

Importantly, once a nation becomes a net importer of food as long as national income continues to grow so will Agri-Food imports. Investment sector of growth in the coming decade has nothing to do with yesterday’s technology companies or withering financial institutions, but is about satisfying the food import needs of nations. Think soybeans, Iowa farm land, and agri-machinery. Remember, you can not eat an iPad, and chicken is not  produced in a factory.

Also since we last visited, the 2nd Agri-Food Commodities: An Investment Alternative July 2010 was released. This report is rapidly becoming the definitive review of the returns produced by Agri-Food commodity prices. Importantly it is independently produced, meaning it is not designed to sell the reader an investment product. This research found that the geometric returns on Agri-Food commodity prices in some measurement periods were significantly better than those produced by U.S. equities or bonds. To read this report, and we warn ahead that is statistical and dry, use this link: http://www.agrifoodvalueview.com...

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: www.agrifoodvalueview.com.

Copyright © 2010 Ned W. Schmidt - All Rights Reserved

Ned W Schmidt Archive

© 2005-2019 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