Archive

Posts Tagged ‘agriculture’

3 Agriculture Stocks With Strong Yields (ADM, MON, TNH)

January 7th, 2013

Jared Cummans: As we enter 2013 investors are faced largely with the same general uncertainty over the future of the U.S. economy that we saw last year. In light of this, a number of commodity investors have turned to dividend stocks to help maintain a sense of security and a steady stream of income Read more…

Agriculture, Investing Guide

13 Ways Corn Is Used In Our Everyday Lives

November 13th, 2012

Janet Fowler: Corn is most often thought of as a food. Perhaps if you’re an avid cook, you might even think of cornstarch or corn-based food additives, or perhaps those who follow the oil and gas news might think of ethanol. However, recent years have seen this dinner staple’s Read more…

Commodities, Education

The Largest Private Landowners In The U.S.

October 30th, 2012

Jared Cummans: Buying and owning hard assets like farmland and timberland has been a popular investing method for many years. Unfortunately, it is too costly and difficult for the average retail investor, so it is often left to those who have access to a significant capital base. Read more…

Agriculture, Commodities

13 Commodity Earnings You Can’t Afford to Miss (ADM, BP, MT, PSX, APA, CHK, XOM, NEM, CVX)

October 29th, 2012

Jared Cummans: As we enter the latter half of earnings season, it is time for a number of the world’s biggest and most significant commodity-based firms to report their results from their most recent fiscal quarter. The figures they post as well as the guidance they provide Read more…

Earnings, Energy, Utilities

Hot Off The Press: Fed To Print $470 Billion In 2013

October 24th, 2012

Jared Cummans: All of the worry about inflation and the Fed’s ability to control it has put this organization under the microscope. Markets react to their every move, and investors take cues from Bernanke for how they should position themselves. The Fed recently released its printing plans Read more…

Currency, Government

Peter Schiff: The Fed Wants To Inflate Housing

October 22nd, 2012

Jared Cummans: Renown and rather outspoken investor Peter Schiff has taken a shot at the Fed in his most recent statements, as he accuses them of trying to inflate the economy. To be specific, Schiff thinks that Bernanke and company want to inflate the housing bubble, Read more…

Commodities, Government, Precious Metals, Real Estate

Invest Like George Soros With This Commodity Stock

October 17th, 2012

Jared Cummans: George Soros is one of the biggest names in commodities, as he is largely known for his success running the Quantum Fund with Jim Rogers. In recent years, Soros has been something of a gold bug, making huge allocations to the SPDR Gold Trust (NYSEARCA:GLD). Read more…

Agriculture, Commodities, ETF

Buy Gold…or Farmland

June 13th, 2011

My friend Brad Farquhar is the co-founder of Assiniboia Capital in Saskatchewan, which invests in farmland there, among other things. He sends the following note:

“Farm Credit Canada, the biggest ag lender in Canada, publishes a province-by-province report on movements in farmland prices in Canada every six months.

“Of course, we track this and are interested in what they have to say. No great surprises in their new data, but we also played around with it to see what else might pop out at us.

“Sometimes in my presentations I show a chart that demonstrates the correlation (within a range) of the price of gold, oil and farmland in Saskatchewan. The correlation is pretty good. Farmland tends to lag a bit because it is a less-liquid asset class and not quoted daily. Also, one acre of farmland is not necessarily substitutable for the next acre the way ounces of gold and barrels of oil are.

“But as the next chart shows, the Sask farmland/gold ratio is getting well outside its traditional range.

The Price of Gold as Measured in Acres of Saskatchewan Farmland

“These things tend to correct themselves, and would do so either by the price of gold coming down or the price of farmland going up. Given the various forces at work in the financial world, I don’t see the price of gold coming down. Which leaves farmland to go up (particularly here in Saskatchewan, where it is still undervalued relative to its productivity).

“With gold held at $1,500, the price of Sask farmland would need to move to $865 per acre just to get back within the normal historical range. The current price is $526 per acre, representing upside of 65%. Of course, we expect gold to move higher too, dragging all other real assets along with it.”

Brad’s firm has been in Saskatchewan farmland since 2005. It’s turned out to be a good call. I have written about Saskatchewan farmland many times in the past…and I have been a longtime advocate of buying farmland. That’s why I’m planning to visit Brad in Regina next month and have a look around. I’ll have more to share with you on all of this soon, as well as ways you can participate.

There are many opportunities in Saskatchewan, which is an agricultural powerhouse. Saskatchewan exports a large percentage of the world’s goods:

  • 67% of world’s lentil
  • 56% of world’s peas
  • 25% of world’s mustard
  • 40% of world’s flaxseed
  • 18% of world’s canola
  • 33% of world’s durum
  • 53% of world’s potash

I remain a big believer in agriculture-focused investments as one of the very best “hard asset” allocations for the decade ahead. Ag investments not only provide a hedge against dollar weakness, they also stand to benefit from extremely favorable supply-demand trends worldwide.

The world needs more food. It won’t be easy to supply it. That’s the kind of trend all investors should crave.

While it’s true that you can’t transport an acre of farmland or spend it as easily as a Krugerrand, neither can you grow lentils on a gold bar. If you have a hard time choosing between the two, buy both.

Regards,

Chris Mayer
for The Daily Reckoning

Buy Gold…or Farmland originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas.

Read more here:
Buy Gold…or Farmland




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Commodities, Uncategorized

Sugar Outlook Sweetens

June 10th, 2011

Rudy MartinThe drop in sugar prices is over. In fact, prices have risen to an eight-week high after news broke that Brazilian production may fall short of expectations.

My indicators are telling me that sweet prices could get even sweeter.

Here are a few significant factors that could move this market:

India’s export threat has disappeared. For months, sugar prices have been held hostage to the idea that India would regain its position as a global sugar exporter; as India is the second-largest producer. Fearing a rise in domestic prices from a domestic crop shortfall, the country is unlikely to set a new quota until fall. The current gap is being filled by Thailand.

China needs sugar. Sugar imports by China, the second-biggest consumer after India, may advance to 2.3 million metric tons in the year ending September 30. With the export price from Brazil or Thailand about 25 cents a pound, that makes it more attractive to China, even with an import tariff of 50 percent. The higher import volume is 28 percent more than the U.S. government forecast!

The United States is short on sugar. The U.S. Department of Agriculture has projected decreased U.S. sugar supply for 2012 with lower imports offsetting higher beginning stocks and production. A potential drop in home-grown sugar coupled with government caps on imports could drive up prices, just before the peak Christmas season.

A harsh winter has caused headaches for U.S. sugar-cane and sugar-beet farmers. Record cold temperatures in December damaged sugar cane in Florida, taking about 260,000 short tons of raw sugar out of production, according to the USDA.

Currently, soil soaked by snow melt and ongoing cool and wet weather in the Midwest is delaying the planting of sugar beets, the source of more than half of U.S. sugar production. The delays could reduce yields because the sugar content of the root increases the longer it is in the ground

The European Union wants sugar too. A European Union (EU) committee recently voted to open a quota for 200,000 metric tons of duty-free sugar imports into the bloc. EU sugar prices surged to more than 1,000 euros a ton in some places earlier this year as the domestic market suffered a supply crisis that left refiners in Portugal, Greece and Poland struggling to access supplies.

Even Mexico increased import allowances, adding to signs that demand is strengthening.

Sugar’s Brazilian Factor: This pretty much puts control on sugar in the hands of the Brazilians, the primary exporters. But Brazil is not overflowing with sugar either. Conditions have been building up against the sugar crop.

The low sugar prices of 2008 and 2009, the financial crisis impact on capital, and recent unstable weather have all contributed to a financial squeeze on farmers. In turn, the investment in crops is less than it could have been.

Brazilian cane crops are older and less efficient than they should be. Sugar cane is now aged 4.2 years, on average, whereas the ideal would be 2 years of age. Ideally 20 percent to 25 percent of the new crop should be replanted. That’s not happening, so yields are lower.

Once the crop is ready, the main issues are crushing and processing. Today, with the higher use of sugar to meet Brazil’s rising need for ethanol, a larger part of the Brazilian sugarcane is being diverted into ethanol fuel production than in the past. This further diminishes sugar for food availability.

The state of S

Commodities, ETF, Mutual Fund, Uncategorized

Keeping Capital in a Depression

May 13th, 2011

Nothing is cheap in today’s investment world. Because of the trillions of currency units that governments all over the world have created – and are continuing to create – financial assets are grossly overpriced. Stocks, bonds, property, commodities and cash are no bargains. Meanwhile, real wages are slipping rapidly among those who are working, and a large portion of the population is unemployed or underemployed.

The next chapter in this sad drama will include a rapid rise in consumer prices. At the beginning of this year, we saw the grains – wheat, corn, soybeans and oats – go up an average of 36% within one month. In the same time frame, hogs were up 30.7%. Copper was up 29.1%. Oil was up 14%. Cotton was up 118%. Raw commodities are the first things to move in an inflationary boom, largely because they’re essential to everything. Retail prices are generally the last to move, partly because the labor market will remain soft and keep that component down, and partly because retailers cut their margins to retain customers and market share.

We are in a financial no-man’s land. What you should do about it presents some tough alternatives. “Saving” is compromised because of depreciating currency and artificially low interest rates. “Investing” is problematical because of a deteriorating economy, unpredictable and increasing regulation, rising interest rates and wildly fluctuating prices. “Speculation” is the best answer. But it may not suit everyone as a methodology.

There are, however, several other alternatives to dealing with the question “What should I do with my money now?” – active business, entrepreneurialism, innovation, “hoarding” and agriculture. There’s obviously some degree of overlap with these things, but they are essentially different in nature.

Active Business

Few large fortunes have been made by investing. Most are made by creating, building and running a business. But the same things that make investing hard today are going to make active business even harder. Sure, there will be plenty of people out there to hire – but in today’s litigious and regulated environment, an employee is a large potential liability as much as a current asset.

Business itself is seen as a convenient milk cow by bankrupt governments – and it’s much easier to tap small business than taxpayers at large. Big business (which I’ll arbitrarily define as companies with at least several thousand employees) actually encourages regulation and taxes, because their main competition is from small business – you – and they’re much more able to absorb the cost of new regulation and can hire lobbyists to influence its direction. Only a business that’s “too big to fail” can count on government help.

It’s clearly a double-edged sword, but running an active business is increasingly problematical. Unless it’s a special situation, I’d be inclined to sell a business, take the money, and run. It’s Atlas Shrugged time.

Entrepreneurialism

An entrepreneur is “one who takes between,” to go back to the French roots of the word. Buy here for a dollar, sell there for two dollars – a good business if you can do it with a million widgets, hopefully all at once and on credit. An entrepreneur ideally needs few employees and little fixed overhead. Just as a speculator capitalizes on distortions in the financial markets, an entrepreneur does so in the business world. The more distortions there are in the market, the more bankruptcies and distress sales, the more variation in prosperity and attitudes between countries, the more opportunities there are for the entrepreneur. The years to come are going to be tough on investors and businessmen, but full of opportunity for speculators and entrepreneurs. Keep your passports current, your powder dry, and your eyes open. I suggest you reform your thinking along those lines.

Innovation

The two mainsprings of human progress are saving (producing more than you consume and setting aside the difference) and new technology (improved ways of doing things). Innovation takes a certain kind of mind and a certain skill set. Not everyone can be an Edison, a Watt, a Wright or a Ford. But with more scientists and engineers alive today than have lived in all previous history put together, you can plan on lots more in the way of innovation. What you want to do is put yourself in front of innovation; even if you aren’t the innovator, you can be a facilitator – something like Steve Ballmer is to Bill Gates. It will give you an excuse to hang out with the younger generation and play amateur venture capitalist.

This argues for two things. One, reading very broadly (but especially in science), so that you can more easily make the correct decision as to which innovations will be profitable. Two, building enough capital to liberate your time to try something new and perhaps put money into start-ups.

Hoarding

In the days when gold and silver were money, “saving” was actually identical with “hoarding.” The only difference was the connotation of the words. Today you can’t even hoard nickel and copper coins anymore because (unbeknownst to Boobus americanus) there’s very little of those metals left in either nickels or pennies – both of which will soon disappear from circulation anyway.

We’ve previously dismissed the foolish and anachronistic idea of saving with dollars in a bank – so what can you save with, other than metals? The answer is “useful things,” mainly household commodities. I’m not sure exactly how bad the Greater Depression will be or how long it will last, but it makes all the sense in the world to stockpile usable things, in lieu of monetary savings.

The things I’m talking about could be generally described as “consumer perishables.” Instead of putting $10,000 extra in the bank, go out and buy things like motor oil, ammunition, light bulbs, toilet paper, cigarettes, liquor, soap, sugar and dried beans. There are many advantages to this.

Taxes – As these things go up in price and you consume them, you won’t have any resulting taxes, as you would for a successful investment. And you’ll beat the VAT, which we’ll surely see.

Volume Savings – When you buy a whole bunch at once, especially when Wal-Mart or Costco has them on sale, you’ll greatly reduce your cost.

Convenience – You’ll have them all now and won’t have to waste time getting them later. Especially if they’re no longer readily available.

There are hundreds of items to put on the list and much more to be said about the whole approach. This is something absolutely everybody can and should do.

Agriculture

During the last generation, mothers wanted their kids to grow up and be investment bankers. That thought will be totally banished soon, and for a long time. I suspect farmers and ranchers will become the next paradigm of success, after being viewed as backward hayseeds for generations.

Agriculture isn’t an easy business, and it has plenty of risks. But there’s always going to be a demand for its products, and I suspect the margins are going to stay high for a long time to come. Why? There’s still plenty of potential farmland around the world that’s wild or fallow, but politics is likely to keep it that way. Population won’t be growing that much (and will be falling in the developed world), but people will be wealthier and want to eat better. So you want the kind of food that people with some money eat.

I’m not crazy about commodity-type foods, like wheat, soy and corn; these are high-volume, industrial-style foods, subject to political interference. And they’re not important as foods for wealthy people, which is the profitable part of the market. Besides, grains are where everybody’s attention is directed.

But there are other reasons I’m not wild about owning any amber waves of grain. Anything you want to plant will practically require the use of a genetically modified (GM) seed from Monsanto. I’m not sure I really care if it’s GM; all foods have been genetically modified over the millennia just by virtue of cultivation. And $1 paid to Monsanto typically not only yields the farmer $5 of extra return, but produces lots of extra food – which helps everybody. But I wouldn’t be surprised if someday the giant monocultures of plants, all with totally identical purchased seeds, don’t result in some kind of catastrophic crop failure. This is a subject for another time, but it’s a thought to keep in mind.

In any event, agricultural land is no longer cheap. But I don’t suggest you look at thousands of acres to plant grain. Niche markets with niche products are the way to fly.

I suggest up-market specialty products – exotic fruits and vegetables, fish, dairy and beef. The problem is that in “advanced” countries – prominently including the US – national, state and local governments make the small commercial producers’ lives absolutely miserable. Maybe you can grow stuff, but it’s extremely costly in terms of paperwork and legal fees to sell, especially if the product is animal based – meat, milk, cheese and such. Niche foods are, however, potentially a very good business. Eternal optimist that I am, I see one of the many benefits of the impending bankruptcy of most governments as again making it feasible to grow and sell food locally.

Above all, though, this isn’t the time for business as usual. You’ll notice that “Working in a conventional job” didn’t occur on the list above. And I pity the poor fools working for some corporation, hoping things get better.

Regards,

Doug Casey,
for The Daily Reckoning

Keeping Capital in a Depression originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas. Bill Bonner, the founder of the the Daily Reckoning released his latest book Dice Have No Memory: Big Bets & Bad Economics From Paris to the Pampas in April 2011.

Read more here:
Keeping Capital in a Depression




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Commodities, Uncategorized

Today, Zimbabwe Tepidly Marks 31 Years of Independent Rule

April 18th, 2011

Back in 2008, Zimbabwe was suffering backbreaking levels of inflation. According to Johns Hopkins applied economics professor Steve H. Hanke, who developed the Hanke Hyperinflation Index for Zimbabwe (HHIZ), “…Zimbabwe’s inflation rate … peaked at 80 billion percent a month. That means around 6.5 quindecillion novemdecillion percent a year–or 65 followed by 107 zeros. To get a handle on it, realize that it’s equivalent to inflation of 98% a day. Prices double every 24.7 hours.”

Three years later, the country has abandoned the Zimbabwe dollar in favor of trade in US dollars, British pounds, euros, and South African rand. The switch helped slow the meltdown in its deteriorating economy, but, hyperinflation aside, the country’s trade situation remains in shambles.

According to Bulawayo24:

“Ironically, Zimbabwe is facing food shortages and has reportedly stepped up maize imports from Zambia (RadioVop, 02/03/11). Major sectors of Zimbabwe’s economy have operated at 40% capacity since 2006, starting with the freight industry which was operating at about 40 percent in October 2006 as a result of ‘continued dislocation of macro-economic fundamentals’ (Zimbabwe Independent, 20/10/06).

“As of September 2010, quoting the London-based researcher GFMS Ltd, the state owned Herald newspaper reported that the gold sector was operating at around 40 percent of installed capacity and that it required US$4 billion to ‘re-capacitate its energy sector to boost output of the precious mineral’.

“Zimbabwe’s trade deficit widened last year as imports outstripped exports by US$2.4 billion according to Zimstats. Like a patient recovering from a deep coma, the country is emerging from an economic slump in which the economy contracted by more than 50 percent from 1996-1998 peak of US$ billion to about US$2.5 billion in 2008 (The Herald, 07/04/11).”

The 87-year old Robert Mugabe has ruled the nation throughout its tumultuous independence, and has shown little interest in relinquishing power. His career that began as a political prisoner of roughly ten years in Rhodesia and peaked as an independence hero has become increasingly tarnished. According to a report in Monsters and Critics.com, today he was able to rally 50,000 attendees to a stadium address in a fashion he knows best, sending Zanu-PF youth “banging on their doors” and telling them to go the stadium, while they wanted instead to spend the day in search “to find food somewhere.”

Still acting Governor of the Reserve Bank of Zimbabwe, Dr. Gideon Gono has openly admitted to his role in many failures managing the Zimbabwe economy. Yet, 31 years after Mugabe took office, he still helms the nation, and — as far as Dr. Gono is concerned — what’s some 89.7 sextillion percent inflation between friends?

Best,

Rocky Vega,
The Daily Reckoning

Today, Zimbabwe Tepidly Marks 31 Years of Independent Rule originally appeared in the Daily Reckoning. The Daily Reckoning recently featured articles on stagflation, best libertarian books, and QE2

.

Read more here:
Today, Zimbabwe Tepidly Marks 31 Years of Independent Rule




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Commodities, Uncategorized

The Unfortunate State of the Argentine Beef Industry

March 24th, 2011

“I thought this was a gas station,” huffed our Argentine friend with disgust. “I somehow forgot it was an Argentine gas station.”

Five gas trucks were parked out front of the YFP station just outside of Tucuman, where your editor and a group of friends were passing through last week on their way to Salta. Cars, vans and motorbikes of every description were queued up around the corner. The line wasn’t moving.

“No hay nafta,” said the station attendant. “No hay nafta hoy.”

Why would there be no gas at a gas station, we wondered? What kind of business was this? Clearly there was a demand. It stretched half way around the block. And since gas trucks aren’t usually in the habit of stopping at gas stations unless they have some supply to unload, we assumed the five trucks out front had the goods everyone had come for.

“This is just typical,” said our friend. “They won’t sell us any today because they know the price will go up tomorrow or the next day. They’re holding onto their stockpiles until they can get a better price for it.”

“How do they know the price will go up tomorrow, or the next day?” your editor inquired.

Our friend rolled his eyes. “They know people who know people who know people. That’s the way this place works. All these industries are the same. They’re run by crooks and mobsters. Tell me, why did you want to move here again?”

“Well, I like wine and steak…” we began.

“And there you have it again. Same problems. The beef industry here, for example, is heavily taxed and regulated. The government says it wants to keep the price of meat low for domestic consumption, so it taxes exports to discourage farmers selling their produce abroad. We Argentines like our bife de chorizo, as I’m sure you’ve noticed. [We have.] Anyway, these policies are all supposedly put in place to help the poor; the ‘little guy.’ Well, you know how that usually turns out…

“We have some of the best beef in the world here in Argentina. The industry should be growing, leading exports. There are plenty of skilled entrepreneurs who could be driving it. Instead, they are hampered by all these ridiculous rules. Needless to say, producers soon found that, with such heavy taxes on exports, they were unable to make the same profits as before. The government effectively cut their profit incentive. So, the farmers cut production. Land that had previously been used to raise cattle was converted to soya farming. Now Uruguay and even Paraguay are overtaking us.

“What’s more, now that supply is down, now that productive capacity has been reduced, the price of meat is going up locally again. As usual, the little guy, the one who the government supposedly set out to help, ends up paying more.”

Our friend is not exaggerating, not about the Argentine’s love for beef nor their government’s love for stupid rules and misguided regulations. At around 63kgs (almost 140 pounds) of consumption per person per year, Argentina is outranked only by Uruguay at the asado. Indeed, Argentines have been chowing down heartily ever since cattle was first introduced into the country way back in 1536 by the Spanish Conquistadors. Herds multiplied rapidly across the rolling, fertile pampas and the later introduction of the national train network – and, in particular, the invention of refrigerated carriages – helped feed the growing export market. Argentina’s cattle industry soared.

But before governments can turn bad situations worse, they must first work on spoiling the best of situations, i.e., the most productive, promising industries. In 2006, after unsuccessful attempts to contain the rising price of their best export (yes, you read that correctly), the Kirchner administration instituted a total ban on all beef exports for 180 days. This was followed by quotas, fixes and the standard sort of mischief and tomfoolery you’d expect from appointed representatives who think they know the price of a good – any good – better than those actually buying and selling it.

Beef exports subsequently collapsed and, from July 2010 to January 2011, actually fell 63% year-on-year. According to the meat industry chamber, CICCRA, government policies cost Argentina some 4,600 small producers and more than 3,500 jobs while simultaneously “condemning all consumers to pay nearly double for beef than the year before and to reduce per capita consumption to 2001-02 levels.”

Meanwhile, Paraguay, that tiny country to Argentina’s north with less than one-sixth of its southern neighbor’s population, is going gangbusters. After logging an incredible 14% GDP growth last year, Paraguay kicked off 2011 by overtaking, for the first time ever, Argentina’s total beef exports for the month of January. Although that growth rate is expected to slow this year, the outlook for the nation’s key farming sectors – including it’s top two exports: soya and beef – remains strong.

After waiting a few minutes longer, we decided to move on to another gas station down the road, one that was open and actually selling gas.

“There are a lot of problems here, Joel,” our mate continued. “This place is run by crooks. The beef industry is just one example.”

We couldn’t bring ourselves to ask about the wine.

Joel Bowman
for The Daily Reckoning

The Unfortunate State of the Argentine Beef Industry originally appeared in the Daily Reckoning. The Daily Reckoning now provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas.

Read more here:
The Unfortunate State of the Argentine Beef Industry




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

2 Of My Favorite "Real Asset" Stocks For 2011

March 15th, 2011

2 Of My Favorite

This has been quite a winter.

From Arab states falling to Twitter revolutions, to U.S. states finally owning up to their own fiscal shortfalls, to natural disasters in New Zealand, Australia and now Japan, stock markets around the world have been swinging up and down in manic runs from hope to despair.

And one other thing is true: The markets hate uncertainty. That means, in our current circumstances, smart investors are looking for real assets — tangible commodities and resources that the world has to have to survive or hedge against uncertainty.

Commodities, Uncategorized

A Vale of Dollars

February 28th, 2011

“It all comes back to commodities,” as Alan Knuckman, editor of Resource Trader Alert, likes to say. From a trader’s perspective, Mr. Knuckman is absolutely right. One need only look at events unfolding around the world, and the commodity price action precipitating them, for supporting evidence.

According to data released by the World Bank, food prices rose a stunning 15% from October through January. The World Bank’s own food index now sits just 3% below its 2008 record. (Though a separate index maintained by the UN’s Food and Agriculture Organization has already surpassed 2008 levels.)

The price spike prompted World Bank chief Robert Zoellick to note: “Global food prices are rising to dangerous levels and threaten tens of millions of poor people.”

From food riots across the Middle East and North Africa to food stamp programs across North America (Uncle Sam is now reportedly feeding some 43 million mouths in the homeland!), it is plain to see that global political stability largely rests (or fails to rest) on the affordability of everyday resources.

In other words, full bellies seldom take to the streets in protest. Governments know this, of course, which is why the surreptitious “bread and circuses” scheme persists as the preferred method of crowd control for states all over the world. A little reality television and a few crumbs from the political classes’ tables is more than enough to sate the riotous impulses of most would-be freedom fighters.

To be sure, there is more than a little “Hanky Bernanke” going on with the world’s supply of non-intrinsically valuable resources, too. We’re referring here to the temporarily disruptive advent of fiat monies. “The Bernank” would like us to believe that his policy of flooding the world with dollars has nothing to do with the escalating price of commodities priced in those very same dollars.

“As to where the blame should fall,” observed Eric Fry in a recent Daily Reckoning, “that’s open to dispute. Bernanke has already presented his defense, pro se, before the court of public opinion. On the other hand, the nifty little chart below testifies persuasively for the prosecution.

Price Action of Commodities in Relation to QE

Bernanke first entered the bond-market-manipulation business back in March of 2009, right around the second “dip” on the prosecution’s chart, above.

“The stock market was on its back,” recalls Eric, “economic conditions were deflationary and fear was palpable. He announced that the Fed would buy $750 billion of mortgage-backed bonds, $100 billion of Fannie Mae and Freddie Mac securities, and $300 billion of long-term Treasury securities…

“With every step down this slippery slope toward dollar debasement,” continues Eric, “the commodity markets reacted ever more violently.”

“Bernanke says the soaring prices of agricultural commodities are a ‘growth effect,’” Eric concludes. “We say they are a ‘dollar effect,’ or rather, a ‘dollar debasement effect.’”

As to the omniscience of central bankers and the omnipotence of the monetary policies in their employ, your editors would profess less fence-sitting agnosticism than outright atheism. Don’t be fooled, Fellow Reckoner. Here on earth, at least, a printed dollar is just another tear in the vale.

Regards,

Joel Bowman
for The Daily Reckoning

A Vale of Dollars originally appeared in the Daily Reckoning. The Daily Reckoning has published articles on the impact of quantitative easing, bakken oil, and hyperinflation.

Read more here:
A Vale of Dollars




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Commodities, OPTIONS, Uncategorized

Bernanke Distances Himself from Rising Food Prices

February 16th, 2011

Is the world finally cracking up? It certainly seems so…at least in that fiery patch of land claimed by the world’s three major monotheistic religions. This is serious stuff. Are you paying attention, Fellow Reckoner? Are you looking at the situation closely? In any case, here’s a freebie:

“Warning: Riots may be closer than they appear.”

Every day we sit down at the computer to read stories of chaos, government overthrow and “anarchy” (as incorrectly defined by the news media) breaking out across the Middle East and North Africa (MENA) region. Here are a few headlines the Associated Press led with this morning:

“Egypt: Death toll put at 365 as strikes continue…”

“Anti-government protests spread to Libya…”

“Thousands of police confront protesters in Yemen…”

“Bahrain protesters urge more pressure…”

What are these people so angry about? So they’re oppressed, under the thumb of the state and barely able to earn enough to feed themselves. But so what? Tunisia’s ousted thug, Ben Ali, held sway over his countrymen for some twenty-three years before finally being given the proverbial boot. In Egypt, the poor, unwashed masses endured three decades of Hosni Mubarak’s disastrous policies. In fact – and perhaps not coincidentally – Egypt was the birthplace of the state. A dubious accolade, indeed. For 6,000 years they’ve suffered the experiment of state-sponsored aggression. So why rise up now? What makes 2011 so special?

Well, for one thing, it’s getting more and more expensive to live from hand to mouth, as the overwhelming majorities in these countries do. More than 40% of the Egyptian people live on $2 per day or less. A whopping 70% rely on food subsidies and handouts. A few percent increase in the price of milk and honey may not break the bank for the average American or European (at least, not yet)…but for those living in Egypt and her surrounding states, it’s the difference between eating and going hungry. These people, it may fairly be said, are quite literally starving for change.

“Global food prices are rising to dangerous levels and threaten tens of millions of poor people,” World Bank chief Robert Zoellick announced yesterday. “It’s poor people who are now facing incredible pressure to feed themselves and their families.”

Chimes Addison Wiggin in today’s edition of The 5-Minute Forecast, “The World Bank’s latest data on food prices reveals an overall 15% increase from October through January. Its index now sits just 3% below the 2008 record, although a separate index maintained by the UN’s Food and Agriculture Organization has already surpassed 2008 levels.”

According to the World Bank’s own data, global wheat prices have doubled between June and January. The price of corn – which is used to feed the cattle, hogs and chickens that populate the meat shelves at your local grocery store – has surged 73% in the same period. Prices for sugar and edible oils have also risen “sharply,” the bank said.

“Zoellick acknowledges rising food prices were ‘an aggravating factor’ behind the downfall of dictators in Egypt and Tunisia,” writes Addison.

But the story doesn’t stop there. Not even close. And here comes our second free tip of the day:

“Warning: Inflation may be closer than it appears.”

In fact, according to some measures, it may be so close it’s already here.

Back in the good ol’ US of A, continues Addison, “Wholesale prices jumped 0.8% in January, according to the Bureau of Labor Statistics. The producer price index has now jumped 3% over the last four months. And no, that’s not an annualized figure.

“Note that the PPI headline number is for ‘finished goods’ – stuff that’s ready to be sold direct to consumers. In the category of ‘crude goods,’ the figures are far worse – up 3.3% in January, and up a staggering 15.8% over the last four months.”

For his part, the man printing all the money chasing these commodities, Fed Chairman Ben Bernanke, flatly denies any wrongdoing. The trillions of dollars he has injected into the world’s economy have nothing to do with the escalating price of commodities, he contends; commodities coincidentally priced in those very same dollars. Instead, Bernanke blames the “two-speed recovery” – where emerging markets are, shall we say, “out-recovering” developed economies – and a failure of these emerging markets to tackle their own inflation.

To blame the increase in dollar supply for the soaring prices of items measured in dollars is “entirely unfair,” complained Bernanke. Again, are you listening to all this, Fellow Reckoner? Are you paying attention?

We wonder how long it will be before we wake to read news of uprisings and riots at the source of the world’s central fiat currency supply. Can’t be long now…

Joel Bowman
for The Daily Reckoning

Bernanke Distances Himself from Rising Food Prices originally appeared in the Daily Reckoning. The Daily Reckoning has published articles on the impact of quantitative easing, bakken oil, and hyperinflation.

Read more here:
Bernanke Distances Himself from Rising Food Prices




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

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