Wednesday, April 20, 2011

the new normal: revolt, migrate, or die...,

FinancialSense | This week wheat and soybeans are up 8 per cent and corn hit a record high of US$7.73 a bushel.

According to the U.S. Department of Agriculture (USDA) farmers in the US expect to plant one of the largest corn and soybean crops in history. Wheat production is up in China, Russia and the Ukraine - India is enjoying strong rice harvests. Growers in Brazil and Argentina have reaped bumper harvests. But production is barely keeping up with demand.

The USDA says inventories of corn and soybeans are plummeting. The supply of corn is at a 15-year low and soybean inventories are at record lows. Canola inventories are also down.
“World agricultural markets have become so finely balanced between supply and demand that local disruptions can have a major impact on the global prices of the affected commodities and then reverberate throughout the entire food chain.” A recent report from HSBC
Living on the edge - US grain production filled critical shortages in world supply three times in the last five years:

* 2007-08 drought hit Australian wheat
* 2009 drought hit Argentine soybeans
* 2010 drought hit Russian wheat
“This has been a demand-driven bull market. I do not think we can see a big enough increase in U.S. acreage to rebuild inventories back to a comfortable cushion in one year. It is going to take two years of good weather and good yields. There is absolutely no room for any weather problems anywhere in the world this year.” Jim Farrell, chief executive officer of Omaha-based Farmers National Co.
Good weather, and good yields for two years in a row just to get back to comfortable levels?

The International Monetary Fund (IMF) said, in a recent report:
“Over time, supply growth can be expected to respond to higher prices, as it has in previous decades, easing pressure on food markets, but this will take time counted in years, rather than months.”
It is estimated that the population of the world reached:

* One billion in 1804
* Two billion in 1927
* Three billion in 1960
* Four billion in 1974
* Five billion in 1987
* Six billion in 1999
* Projected to reach seven billion by early 2012
* Eight billion by 2030
* By 2050, the world's population is expected to reach around nine billion - minimum and maximum projections range from 7.4 billion to 10.6 billion
* By the mid 2060s it’s possible that 11.4 billion people will inhabit this planet

Over the next fifty years, as we add another 4.5 billion people to the world’s population, global demand for food will increase almost 70% if population growth predictions are correct.
Already approximately 1 billion people go to bed hungry each night. Somewhere in the world someone starves to death every 3.6 seconds - most are children under the age of five.
“Rising food prices are a threat to global growth and social stability and the world is just one poor harvest away from chaos.” Robert Zoellick, president of the World Bank
We have to realize that higher food prices and the resulting civil unrest are not a temporary condition but a New Normal and adjust ourselves accordingly.

Is a New Normal, the coming Harsh Times, on your radar screen?