07-01-2011 05:00 AM
“We’ve got to do something or we’re going to have no food at any price at times in the next few years,” Rogers said in a Bloomberg Television interview with Rishaad Salamat in Singapore. “I still own agriculture. If I found something to buy, I would buy it.”
Rogers joins former United Nations Secretary General Kofi Annan, the UN Food & Agriculture Organization and the World Bank, in highlighting the need to boost global food production and address issues pushing prices higher. Group of 20 farm ministers agreed last week to increase agriculture output, set up a crop database and limit export bans to tackle what French President Nicolas Sarkozy calls the “plague” of rising food prices.
Monthly food prices tracked by the FAO have surged nine times in the past 11 months and last month stayed near a record reached in February, as global demand for corn and wheat outstripped production and drought and flooding ravaged harvests. The World Bank estimates higher food prices have pushed 44 million more people into poverty.
China, the world’s largest consumer of grains, energy and metals, has raised interest rates four times since October and increased bank reserve requirements nine times to tame above- target inflation. The nation’s food-price inflation was at 11.7 percent in May, matching levels in March and November when they were at the highest since July 2008, the year of the global food-price crisis.
Global stockpiles of corn, the most-consumed grain, are forecast to drop to 47 days of use, the fewest since 1974, data from the U.S. Department of Agriculture show. Inventories are declining as demand continues to outstrip production that’s forecast to rise to a fifth consecutive year of record.
The Standard & Poor’s GSCI Agriculture Index fell 9.6 percent this quarter, the first loss since the first three months of 2010. While corn has lost 4.7 percent this quarter, the grain is still 92 percent costlier than it was a year ago, making it the best performer in the index. Corn traded at $6.685 a bushel in Chicago.
Inventories of wheat, used in making pasta, noodles, bread and feed for hogs and poultry, will drop to a three-year low of 184.26 million metric tons before next year’s Northern Hemisphere harvest, as output misses demand for a second year, the USDA said.
“Production just hasn’t been able to respond to new demand,” Michael Creed, an agribusiness economist at National Australia Bank Ltd., said in a phone interview from Melbourne. Demand continues to outstrip global harvests because of rising ethanol production in the U.S. and China’s surging demand for meat, Creed said.
“Grain is a solid input into all those food sectors and so there’s really no way to go to avoid grain-based inflation,” John Bryant, chief executive officer of Battle Creek, Michigan- based Kellogg Co., the largest U.S. maker of breakfast cereal, said in a June 2 conference.
Unless governments come together to successfully address the issue of food security, “hopes for wider international cooperation looked doomed,” Annan, who served as UN Secretary General from 1996 to 2007, said last week.
“We have serious problems in inventories” of farm products, Rogers said.
© Copyright 2011 Bloomberg News. All rights reserved.
07-01-2011 08:00 AM
Here`s the funny thing, the March intentions showed 92.2 million and we had the prospects of a perfect spring ahead. Gurus like Jamie Kolhacke were bantering about even 94 mil acres, this was seen as bullish "gotta be above trend on all those acres don`t ya know". Now here we are, close to March`s intentions, less than stellar planting, even with a trumped up report and it`s the grizzly of all bears. I understand about stocks, but these lower prices should gobble up a good chunk of those newly discovered phamtom bushels. It seemed livestock, ethanol and exports were at least treading water at +$7 corn. Believe it or not this report was probably healthy, because a brutally honest one would`ve sent corn to $9, then there actually would be endusers losing money and there would be rationing. JMHO
07-01-2011 11:53 AM
The idea that paper moves are a good barometer of the situation ahead is an idea one should know isn't a good POV for guaging the market as it will become.
I don't blame the USDA for the report! Reactions in the market do trigger a cascade of follow on reactions due to computer models and subsequent computer trading that are reaction to market behavior - not necessarily physical fundamental market issues in the longer run. Not understanding this is hazardous to your marketing health.
The market "is", but it doesn't mean it is "right" in a fundamental way. If, for instance, it turns out we need rationing, we are not likely to get it now.
07-01-2011 04:49 PM
When it comes to marketing, too many times I've been right. Dead right. My call was accurate but the timing was off so I got run over by a market going the wrong way. It doesn't feel any better to lose money because others are wrong that it does because I am wrong. Maybe it's worse.
07-01-2011 08:03 PM
The physical fundamental picture is more likely to be more long range in scope than any particular technical or report driven event. There are times when basic fiscal issues have to be addressed and getting backed into a corner is no fun. I try to have lots of lattitude for cash flow and slow down, or even speed up sales, and retain options for those items I must address.
There are no magic bullets on any given move except being able to roll with the flow.