How much of this can be attributed to speculation in commodities? http://www.cnn.com/2011/WORLD/europe/02/03/world.food.prices.rise/index.html?hpt=T2
Interesting http://www.omaha.com/article/20110203/MONEY/702039857#healthy-farm-prices-produce-rising-farmland-prices
my guess - close to zero.
CFA Jay Wrote: ------------------------------------------------------- > Interesting > > http://www.omaha.com/article/20110203/MONEY/702039 > 857#healthy-farm-prices-produce-rising-farmland-pr > ices Ha, time to quit the CFA/MBA/whatever and go back to farming!
marcus phoenix Wrote: ------------------------------------------------------- > CFA Jay Wrote: > -------------------------------------------------- > ----- > > Interesting > > > > > http://www.omaha.com/article/20110203/MONEY/702039 > > > > 857#healthy-farm-prices-produce-rising-farmland-pr > > > ices > > > Ha, time to quit the CFA/MBA/whatever and go back > to farming! No kidding!
^ listening too much to Jim Rogers…
Jeremy Grantham is also bullish on agriculture.
next best option after going into farming yourself is to buy Ag related names. still upside in stuff like ADM, BG, etc…Ag processors and fertilizer & seed names like POT, MON,etc. as for prices being driven by speculators, i would partially disagree. the stocks/use (inevntory levels) for corn, soybeans,wheat, etc are all at multiple year lows while demand from EMs and even Ethanol-Biodiesel demand is very strong. but of course, increasing net long positions in these commodities by HFs is also helping…
I’d say it’s more driven by increasing global demand and the Fed endlessly printing money. But don’t worry folks, CPI is close to zero. Nothing to see here, move along.
I don’t buy that US printing is making food more expensive. Yes, food prices are quoted in USD, but they aren’t “fixed” in USD. If there are more dollars, the demand is still the same, but the price in USD goes up… that’s fine. But for other countries, if the USD is inflating, then that means they can buy more food in the local currency. So the price in dollars goes up, but that doesn’t mean that the price in Dinars or Euros or other stuff has to go up. If the dollar is weakening, then the other currencies are strengthening, so the higher foreign currency value offsets the higher dollar price for the food. The only countries where this is a problem are countries that have pegged their currencies to the dollar (notably Gulf countries, and China, and somewhat in India).
bchadwick Wrote: ------------------------------------------------------- > If the dollar > is weakening, then the other currencies are > strengthening, so the higher foreign currency > value offsets the higher dollar price for the > food. By that logic the real price of food never changes for anyone outside the US that has a floating rate currency.
No, the real price moves based on changes in world supply and demand for food… but it doesn’t change simply because of US money printing.
I wasn’t being entirely serious. Nevertheless, I would argue that there is not exact parity between exchange rates and inflation. The fact remains wheat has gone up nearly 100% in a year and the US is a large exporter. Is the price increase due to inflation, global supply/demand, or speculation? All three play a role to a certain extent, but I’d say inflation is playing a larger role than speculation and perhaps even more so than supply and demand. And, if you really want to dive into the weeds, the easy access to money has made it easier to speculate on commodities too. I just don’t see how anyone could say printing money hasn’t caused prices to increase.
even if commodities futures investing is a driver, can you really call it speculation? Aren’t a lot of pension funds plowing money into it as an inflation hedge? If they’re doing it to hedge the inflation component of their future liabilities, and not to bet that the price is going to go up, can you call it speculation?
bchadwick Wrote: ------------------------------------------------------- > No, the real price moves based on changes in world > supply and demand for food… but it doesn’t > change simply because of US money printing. this, sweep the leg has been reading way too much zerohedge
wake2000 Wrote: ------------------------------------------------------- > bchadwick Wrote: > -------------------------------------------------- > ----- > > No, the real price moves based on changes in > world > > supply and demand for food… but it doesn’t > > change simply because of US money printing. > > > this, sweep the leg has been reading way too much > zerohedge Too much ZH is a dangerous thing! I’m not that crazy. But I do think it’s irrational to assuming pushing $2.6 Trillion into the monetary system isn’t going to have some repercussions. Or you can just go on believing the CPI numbers…
Where do you think most of the new dollors and the inflation end up, other countries are importing it… and lets not forget the terrible weather being experienced throughout the world, causes spoilage of must crops, take the sugar cane from australia for example
…or it ends up in treasuries.
So if you throw a big enough mudball, there’s got to be a little bit splattered everywhere. That’s your analysis? It’s vague enough that it’s probably correct to some degree, but also so vague that it is also pretty useless. Sure, I can imagine that second order effects of money printing probably do spill over in some way, but that’s entirely different than saying it’s a primary driver of higher global food prices. It’s like listening to Larry Kudow whine that Egypt’s problems are all because Ben Bernanke is printing too much (and forgetting that some protesters might be wanting free market capitalism because its the best path to prosperity). Sure, all that money printing is making food prices higher IN THE US. There’s little doubt of that. But it’s US consumers (and countries with dollar-pegged currencies) that are facing it. Global food prices are almost certainly being driven by demand increases (wealth and changing diets among Chinese, Indians, Brazilians, etc.) and supply decreases (floods, freezes, heat waves, etc) around the world.
‘…or it ends up in treasuries’…very true