Monday, October 11, 2010

Food for Thought

We worry about the prices of Gold and Silver yet John Clemmow of UBS made this statement a few weeks back "Rice is the new iron ore, and corn the new gold." Why?
He explained that as the global population swells to 9 billion by mid-century,  that food supply shocks IS hitting us now and while food shortages have been around as long as time immemorial never has there been such a demand for basic foods. Consider what has happened in the last few months.   We experienced the droughts in Australia that did not impact us much in North America, then the floods in Pakistan that in days destroyed staple foods; consecutively there were the heat waves around the Black Sea where Russia an exporter of grain put the breaks on exports sending prices souring.
Wheat, prices rose to some 75% since June in a matter of days,as the Black Sea region suffered through the most severe heat wave in nearly half a century. Did Gold or Silver or even oil perform at that rate?
The affected area ordinarily produces roughly one quarter of the entire global output. Consequently, experts forecast Russia's harvest well shy of the 75 million tonnes consumed domestically. Moscow has since implemented a ban on grain exports until late 2011.

Then there is Corn, that is up more than 40% since June as global stock levels, with a "stock to usage ratio" of a paltry 12%, dipped to their lowest levels in almost four decades. Unfavorable weather patterns in the US kicked the rally off, but it was the revelation that China, feeding the fastest growing middle class on the planet, imported a record 432,000 tonnes in August that really kicked it into overdrive.
Now the US diverts just a little over one third of its entire crop production to ethanol for fuel, which lead one commentator to declare the program a blatant act of "unsustainable, government-sponsored food burning."

To add to this we have heard about the rising cost of Coffee.  Prices have risen by over 40% since September, 2010.
What is all this about.  Maybe our attention should be watching the commodity markets and look for growth and potential there instead of Gold and Silver.   Remember the story of King Midas that every thing he touched turned to gold, but also remember that he could not eat  gold so where do our priorities lie?   Maybe the lesson is that we need to literally watch  our “food” supply chain more and how to better our environment through real ‘sustainable supply chain’ methodology that just giving lip service to it.