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Thread: strongest 2010 gloom & doom prediction - food crisis ?

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    Default strongest 2010 gloom & doom prediction - food crisis ?

    (snip)"If you read any economic, financial, or political analysis for 2010 that doesn’t mention the food shortage looming next year, throw it in the trash, as it is worthless. There is overwhelming, undeniable evidence that the world will run out of food next year. When this happens, the resulting triple digit food inflation will lead panicking central banks around the world to dump their foreign reserves to appreciate their currencies and lower the cost of food imports, causing the collapse of the dollar, the treasury market, derivative markets, and the global financial system. The US will experience economic disintegration."(snip)

    (snip)"The 2010 Food Crisis is different. It is THE CRISIS. The one that makes all doomsday scenarios come true. The government bailouts and central bank interventions, which have held the financial world together during the last two years, will be powerless to prevent the 2010 Food Crisis from bringing the global financial system to its knees.

    Financial crisis will kick into high gear

    So far the crisis has been driven by the slow and steady increase in defaults on mortgages and other loans. This is about to change. What will drive the financial crisis in 2010 will be panic about food supplies and the dollar’s plunging value. Things will start moving fast.


    Dynamics Behind 2010 Food Crisis

    Early in 2009, the supply and demand in agricultural markets went badly out of balance. The world experienced a catastrophic fall in food production as a result of the financial crisis (low commodity prices and lack of credit) and adverse weather on a global scale. Meanwhile, China and other Asian exporters, in an effort to preserve their economic growth, were unleashing domestic consumption long constrained by inflation fears, and demand for raw materials, especially food staples, exploded as Chinese consumers worked their way towards American-style overconsumption, prodded on by a flood of cheap credit and easy loans from the government.

    Normally food prices should have already shot higher months ago, leading to lower food consumption and bringing the global food supply/demand situation back into balance. This never happened because the United States Department of Agriculture (USDA), instead of adjusting production estimates down to reflect decreased production, adjusted estimates upwards to match increasing demand from china. In this way, the USDA has brought supply and demand back into balance (on paper) and temporarily delayed a rise in food prices by ensuring a catastrophe in 2010.

    Overconsumption is leading to disaster

    It is absolutely key to understand that the production of agricultural goods is a fixed, once a year cycle (or twice a year in the case of double crops). The wheat, corn, soybeans and other food staples are harvested in the fall/spring and then that is it for production. It doesn’t matter how high prices go or how desperate people get, no new supply can be brought online until the next harvest at the earliest. The supply must last until the next harvest, which is why it is critical that food is correctly priced to avoid overconsumption, otherwise food shortages occur.

    The USDA – by manufacturing the data needed to keep supply and demand in balance – has ensured that agricultural commodities are incorrectly priced, which has lead to overconsumption and has guaranteed disaster next year when supplies run out.


    An astounding lack of awareness

    The world is blissful unaware that the greatest economic/financial/political crisis ever is a few months away. While it is understandable that general public has no knowledge of what is headed their way, that same ignorance on the part of professional analysts, economists, and other highly paid financial "experts” is mind boggling, as it takes only the tiniest bit of research to realize something is going critically wrong in agricultural market.

    USDA estimates for 2009/10 make no sense

    All someone needs to do to know the world is headed is for food crisis is to stop reading USDA’s crop reports predicting a record soybean and corn harvests and listen to what else the USDA saying.

    Specifically, the USDA has declared half the counties in the Midwest to be primary disaster areas, including 274 counties in the last 30 days alone. These designations are based on the criteria of a minimum of 30 percent loss in the value of at least one crop in the county(snip)

    (snip)"The same USDA that is predicting record harvests is also declaring disaster areas across half the Midwest because of catastrophic crop losses! To eliminate any doubt that this might be an innocent mistake, the USDA is even predicting record soybean harvests in the same states (Oklahoma, Louisiana, Arkansas, and Alabama) where it has declared virtually all counties to have experienced 30 percent production losses. It isn’t rocket scientist to realize something is horribly wrong.

    USDA motivated by fear of higher food prices

    The USDA is terrorized by the implications of higher food prices for the US economy, most likely because it knows the immediate consequence of sharply higher food will be the collapse of the US Treasury market and the dollar, as desperate governments and central banks dump their foreign reserves to appreciate their currencies and lower the cost of food imports. Fictitious USDA estimates should be seen as proof of the dire threat posed by higher food prices, as the USDA would not have turned its production estimates into a grotesque mockery of reality if it didn't believe the alternative to be apocalyptic."(snip)

    (snip)"The US exported over 7 MMT of soybeans in November! Furthermore, since the US exported 3.7 MMT in the first two weeks of December, the rate of exports isn’t slowing down. At this rate the US soybean supplies will start running critically low around March/April.

    Economic Pandemonium

    The true financial crisis begins when the world realizes that there are couple months food supply missing from 2010. The last two years were a gentle, mild preview of the real thing.

    Total Panic

    The sudden, shocking discovery that food supplies are running out will produce total panic. The reaction will inventory building — hoarding –at all levels. Major food producing nation will export bans (India has already banned food exports). Producers, Middlemen, And Households will rush the acquire supplies. All this hoarding will wrosen the crisis by throwing supply and demand further out of balance: export bans cut supply available on international market and inventory building increases demand. Food prices will more than double.

    Central bank exodus from the dollar

    With one out of eight Americans on food stamps, foreign central banks are subsidizing US food consumption by funding the US government with their treasury purchases. Once the food crisis begins next year, they will be faced with the choice:

    1) Continue subsidizing US food consumptions as triple digit food inflation ravages their economy and their people starve.

    2) Dump their treasury holdings onto the market to rapidly appreciate their currencies, lowering the cost of food imports and preventing widespread domestic starvation.

    Not much of choice. China, for example, will drop the dollar peg without a second thought to prevent triple digit food inflation from damaging its economy and causing widespread of social unrest. Chinese exporters will be badly hurt, but that will be a small cost if it can keep food prices down."(snip)

    from


    Admittedly I am not much of a follower of agricultural markets. However, if this analysis is true, by March or April the world should start to see rapidly rising 'commodity' food prices ... and importing countries will thus respond with currency interventions that allow them to mitigate their home currency costs of purchasing US food exports, to the extreme detriment of the US dollar.

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    Default Re: strongest 2010 gloom & doom prediction - food crisis ?

    I agree with you Melonie on the overall idea of food shortage, but I think the time frame may be 2- 3 years longer. Food is more correlated with Oil prices now than any time before in history due to technology allowing for biofuels. I expect if oil can rise to >$200/barrel (which is 20x the low of $10/bbl in 1999), then you can expect agricultural commodities to rise >15x from the lows. There are a ton of factors favoring higher pending food prices, which include decades of underinvestment in agriculture, declining arable acerage per person, lack of people who want to be farmers, the beginnings of overpopulation, lack of water around certain parts of the world, and worldwide quantitative easing debasing currencies everywhere. One of the ways to protect yourself would be to buy stocks like Potash, Mosaic, and Agrium, which is pretty much like a little Potassium Cartel. Canada has 40% of the world's potash reserves. They've had a good run already, but should go much higher when agricultural commodities rise to unbelievable heights. I can see Potash surpassing the $230 peak and going to $400 or $500 per share and reach $150 billion market capitalization (now at $118 and $35B market cap) when Potash prices break $2,000/tonne, which will just be like the internet bubble a decade ago, except this time in food. It will be crazy and there will the biggest food riots in history. Some poor governments in the world may topple, especially in countries whose citizens spend >50% of income on food. Incidentally, if you do see world food riots on the front page news and CNN cover page, that may be a good sell indicator, as things don't go up forever, and a sudden surge in interest rates and a strong counter-trend bear rally in the Dollar can cause prices to tumble in commodities, just as happened in June- Oct 2008

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    Default Re: strongest 2010 gloom & doom prediction - food crisis ?

    agreed on the future profitability of fertilizer stocks over a 2-3 year time frame. In fact this is a good buying opportunity since just this morning Bloomberg reported that Potash profits had declined 89% in Q4 ... primarily based on the unavailability of affordable credit for farmers to purchase fertilizer for this year's crop !!! Thus, I'm not so sure about your 2-3 year time frame re agricultural commodity prices in general. For example, how do you explain record commodity sugar prices being hit right now ?



    (snip)"Sugar prices enjoyed a record-breaking run this week as wet weather affected output in Brazil, the world's largest producer.

    Conab, the national crop supply agency, said Brazil's sugar production would be 2.1m tonnes less than expected because of heavy rains between July and November.

    Conab forecast 2009-10 output would fall to 34.6m tonnes compared with September's projection for 36.7m tonnes.

    More wet weather is forecast in Brazil, which would exacerbate supply tightness as global stocks have already shrunk to a record low and key consuming countries are expected to increase imports to meet rising domestic demand.

    Liffe March white sugar hit a record $687.2 a tonne yesterday, up 116 per cent this year.

    Prices retreated to $677 a tonne later in the session, up 8.1 per cent this week.

    In New York, raw sugar prices traded at a 28-year high at 26.94 cents a pound, up 12.2 per cent this week"(snip)
    Last edited by Melonie; 01-06-2010 at 05:28 AM.

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    Default Re: strongest 2010 gloom & doom prediction - food crisis ?

    where did this even come from?
    2010 was initially deemed to be a more economically stabler year

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    Default Re: strongest 2010 gloom & doom prediction - food crisis ?

    Quote Originally Posted by anouk.oui View Post
    where did this even come from?
    2010 was initially deemed to be a more economically stabler year
    This is like the calm before the "silent tsunami". That's what some call the impending food crisis. 2010 is more stable because stock markets worldwide have recovered, jobs are not being lost at a horrendous pace, and economic indicators aren't at 30 year lows any longer.

    However, beneath the facade of calm is a gradual buildup toward the next disaster within a few years. Higher food prices, energy prices, and potentially much higher interest rates that will drive unemployment back up above 10% and discretionary income down for the next 6 - 8 years.

    The greater difficulty in making money as an entertainer is symptomatic of the longer run fundamentals of this economy affecting virtually every industry. Joblessness, lost businesses, and decline in value of the US Dollar are all symptoms of the larger forces of the social and political environment of a country peaking in its dominance. We choose or don't choose to elect certain officials allowing policy actions that are in the aggregate detrimental to the economy.

    By the way, just because biofuels are growing doesn't mean they are good investments. The biofuels industry are price takers and lose big when the price of ethanol (output) cannot exceed the price of the cost of raw materials (input), i.e. corn. I also see the Restaurant industry coming into a world of hurt when they get hit both sides from less people eating out and higher costs that cannot be passed on to consumers. Ditto for cereal companies, Domino's pizza, Coca Cola, and any other business that are price takers. Conversely, when many years from now the commodities shortages become surpluses due to everyone wanting to become miners, farmers, etc., then these companies will do very well. However, this later scenario won't be for many, many years.

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    Default Re: strongest 2010 gloom & doom prediction - food crisis ?

    There are a LOT of reasons why 2011 is going to be a VERY unhappy year. We are going to have anasty bout of inflation for a number of reasons. Food and energy prices are just part of the picture."Helicopter Ben" Bernancke and the idiocy at the Fed is another big part of it.

    Extreme weather, higher prices for fertilizer, lack of credit for farming ( farmers can't get credit to expand acreage by purchase, lease and/or reclamation ) add up to higher food prices.

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