The world needed everything to go right with northern hemisphere crops this year simply to keep up with rising food demand, but things are going wrong.
The prevented seeding story in Canada and the United States is well documented, as is the drought in Western Europe.
It appears high grain prices will be needed to ration demand in 2011-12, so long as the world does not plunge back into recession.
A U.S. Department of Agriculture report last week supported the high grain price argument.
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China’s grain imports have slumped big-time
China purchased just over 20 million tonnes of wheat, corn, barley and sorghum last year, that is well below the 60 million tonnes purchased in 2021-22.
It lowered the expected U.S. corn seeded acreage and forecasted that corn stocks at the end of the new crop year would shrink to a 19 day supply from 19.7 days at the end of the current crop year.
That is pretty much pipeline supply – the grain sitting in elevators, rail cars and barges after farmers have swept out the last kernel from their storage. So there is a fundamental supply reason for corn prices hitting a record last week, helping support grain prices generally.
The price is also supported by record high speculative investment from huge funds, fueled by a cheap money environment fostered by the U.S. policy of quantitative easing.
However, that policy, which pumped hundreds of billions of dollars into markets, is about to end.
Today’s high commodity prices also rest on Chinese demand and it is possible that it might slacken, as Ed White reports this week.
China and the United States now have about 200 skyscrapers each, defined as a building taller then 152 metres, or about 50 stories. In five years, China will have 800 skyscrapers, fueled by soaring real estate prices. But World Bank economists last week warned that China’s real estate bubble is a major risk for the Asian giant.
AWall Street Journalstory notes that market research firm Dagonomics found real estate prices fell almost five percent in April in nine major Chinese cities.
If the housing bubble were to burst as it did in the U.S., it would stagger the Chinese economy, which to date has helped hold up the world economy while the U.S. continues to slowly recover from its own housing debacle.
The one-two punch of the end of stimulative spending in the U.S. and a potential slowdown in China’s growth has markets on edge.
It is hard to comprehend China’s growth. Note this: based on projects started and expected to start, China
