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Veteran Advisor

What will next summer hold?

THere have been amazing moves higher inso many food staples since the first of the year that I wonder how much more we can go up before this thing brings riots like those seen in the middle east, north Africa, and europe.  Here is some excerpts from Zero hedge

The Fed chairman is 100% confident inflation can be contained. Rapidly spreading rioting (5 countries so far) would take the under on that.

Latest on Tunisia:

Twelve people were killed in overnight clashes in the Tunisian capital Tunis and the northeastern town of Ras Jebel, according to accounts from two medical sources and a witness on Friday.

Ten of the victims were killed after clashes in the capital, two sources from Charles Nicolle hospital told Reuters.

A witness from Ras Jebel, who identified herself as Narjes, said: "I saw two dead people with my own eyes after police fired at youth".

Tunisian officials could not immediately be reached for a comment. It was not immediately clear whether the shootings took place before or after the country's president ordered police to stop using lethal force against demonstrators.

And now the violence has spread to Jordan:

Food price protests sweeping across North Africa and the Middle East reached Jordan on Friday, when hundreds of protesters chanted slogans against Prime Minister Samir al-Rifai in the southern city of Karak.

The peaceful protest was held despite hastily announced government measures to curb commodity and fuel prices. Similar demonstrations were held in three other towns and cities across the country, witnesses said.

"We are protesting the policies of the government -- high prices and repeated taxation that made the Jordanian people revolt," Tawfiq al-Batoush, a former head of Karak municipality, told Reuters at the protest outside Karak's Al Omari mosque.

Three days ago, after riots in Algeria and Tunisia over high prices, unemployment and falling living standards, Jordan announced a $225 million package of cuts in the prices of some types of fuel and of staple products including sugar and rice.

Other Arab countries have taken similar steps. Libya abolished taxes and customs duties on food products and Morocco offered compensation to importers of soft milling wheat to keep supplies stable after a surge in grain prices.

...Morocco (google translated)

Protests against price rises and unemployment moved from Tunisia to Morocco, where the streets of Rabat, yesterday, saw clashes between young protesters and police forces, which tried to prevent them from organizing a demonstration outside the Moroccan parliament, in protest against unemployment and high prices and the cost of living in Morocco

And Yemen:

In Yemen, Yemeni President Ali Abdullah Saleh fired Minister of Oil and Chief Executive, the Yemen Petroleum Company Omar Arhabi, yesterday, due to a lack in the supply of petroleum products, not available in the market, which led to bottlenecks in front of gas stations and the creation of indignation among the citizens.

Not like there is much to add here, but we would like to add that if a rising stock market was indiciative of "wealth" then the citizens of Zimbabwe have to be the richest people in the universe.

 THis week with the floods in Brazil the Goverment order 66 million puonds of dry milk products for disaster relief. It caused CME milk markets to rally on Friday by BY 14 cents a pound! 
Looking out we can see live cattle fututres at $1.16 for dec. folks that is huge that puts rail beef at nearly $2 dollars a pound!  With projections of $21 dollar milk this summer that takes whole milk in the store surging past $4 dollars a gallon!  And 21 dollar milk is barely break even! Add to that 3.50 gas and I think we will see riots here in the good ole USA.  And who is going to take the brunt?
SO hold on folks we will become the most hated segment of society. 

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6 Replies

Re: What will next summer hold?

Not to get your blood pressure to rise any further, but have you seen all these articles about almond milk in the past month or so.....hey, I am not against competition, but saw one article where they were comparing prices....and the price they were using for "cow's milk" was $1.25 for 32 ounces at a Giant store in Maryland.....which translates to $5 per gallon....


now maybe they are making those comps because almond milk and the other specialty milks are rarely sold in gallon containers....but I thought it a bit of an unfair comparison to be saying that good ole milk is $5 a gallon!!

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Veteran Advisor

Re: What will next summer hold?

Ray good to hear from you this morning!  Yea I am up to speed on the almond milk thingy. The funny thing is that the store was comparing a name brand milk product that typically fetches a higher price as it is sold in upscale grocers. BUt the scarry thing is that milk in the suburbs of DC is already pushing $4 a gallon. And don't worry after the last week around here my blood pressure is already to high!( and it didn't have anything to do with the corn market)

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Veteran Contributor

Re: What will next summer hold?

JR..a couple of questions. I noticed ClassIII futures have rallied significantly in the last two weeks beyond $15. What has been the driver? The dairy I work with feels the $17 cash price is profitable. I am surprised by your suggestion that $21 milk is breakeven. They also tell me that all their relatives (in four different countries) have had excellent dairy prices while the US has struggled the last two years. What is the cause of this? Do you feel that US dairy will have a profitable year in 2011?

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Senior Advisor

Re: What will next summer hold?

Don't know JR but something will have to give. Higher food prices are really starting to get noticeable at the grocery store. Biofuels and the CRP program will probably be front and center issues for discussion by the American public even though they are small contributors of higher prices. These prices for grain are great for those who have it but these prices can be negative in the long run. If we eliminate biofuels and open up all of the CRP ground the glut of grain would set grain farmers back to the poor days. It still amazes me how the #2 soybean crop and #3 corn crop on record could make $13 beans and $6 corn. I know this rally in crop prices is weather related but we can't raise a big crop every year. 2011 corn prices may end with a 3 in front or a number in the teens.... Yikes good luck JR.

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Veteran Advisor

Re: What will next summer hold?

Morning there Patriot.

I'll try to answer your questions in order.

1.Yes the class 3 price has risen significantly July topped 16 dollars on Fri.  The reason is because of class 4 with butter going on a tear they must keep the flow towards cheese as well so they have to pay up for the vat to keep up with your churn. 


2. Yes the midwest price of 17 is probably for the low leveraged high producer  a good breakeven The 21 I used was from several sources which used that as a break even over all regions with 21,000 milk production. 


3. Yes world prices have been significantly higher for the past two years. the reason is complex yet simple. 


A. first the US has Never been the big dog in exports. we have lived off of our countries demand and enjoyed a nice uptick when the world came to us.  With the recession that has hit the US since 2008 we have been taking the cost cutting of an aging population right squarlely the pocketbook of the dairy man.


B. The cost of frieght has made us largly uncompetitive in the world market.


C. OUr banking industry has been unwilling to clear it's books of dairies who's balance sheets are stillusing RE values based off of high urban RE values. that is abou to change BTW. This has allowed our overproduction to continue. While we I feel right now are very balanced as to the S/D we have not cleared our inventories.


4. I don't know. I think it depends on your view of profitablility.  ALso it depends on if you are growing your feed or not. With the cost of feed those who are dependent on purchases will have very difficult times ahead.  WIth the MILC pmts. projected to be paid out for 10 of the next 12 months we could assume that this will not be a very good year. 

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Veteran Advisor

Re: What will next summer hold?

Black the UN has been noticing this price for a while and is getting very concerned when they bring international pressure to bear on the US about high grain prices look out.  ALso when the fed needs to raise some more money and they have to raise interest rates pain will have awhole new meaning. 

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