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Wheat Trades Limit Up As Russia Halts Grain Exports Through Year End
By now readers have likely seen the satellite photos of smoke clouds over pretty much all of western Russia, as today Moscow once again bakes in record heat and the entire former USSR breadbasket is caught in a historic drought. Recent concerns about the Soviet wheat harvest have already caused wheat prices to surge, yet this morning's announcement from Putin that Russia will stop all grain exports starting August 15 and continuing through the end of the year just sent what limit up. FT reports: “I think it would be expedient to introduce a temporary ban on export grains and other agricultural goods,” Mr Putin told a cabinet meeting. “We cannot allow an increase in domestic prices and we need to maintain the number of cattle. Wheat prices rallied sharply on the news. In Chicago, wheat jumped by its daily limit of 60 cents to a new two-year peak above $7.85 a bushel, up almost 80 per cent in a little over a month. In Paris, European wheat hit €222.75 a tonne, up 6.6 per cent on the day." And it appears other commodities are set to follow: "Ïnterfax, the Russian news agency, earlier quoted a source in one of the economic ministries as saying that the export ban could affect wheat, barley, rye, corn and flour.”
This is not the first time Europe has locked out its critial grain exports:
Moscow introduced export restrictions during the 2007-08 global food crisis, triggering a wave of panic buying from North Africa and Middle East importers.
The worst drought in more than a century in the Black Sea region has led to widespread alarm in the wheat market, with prices recording their sharpest rise since 1972, when Moscow bought almost all the available surpluses in the US to cover a domestic shortfall.
Forecasts for the Russian grain crop have been falling daily, with the agriculture ministry’s most recent projection at 70m-75m tonnes, down from 85m tonnes a fortnight ago. Some private sector analysts, however, believe the harvest will be as low as 63m tonnes. Traders at Glencore, the world’s largest commodity trading company, on Tuesday warned the crop could fall to about 65m tonnes.
Russia harvested almost 100m tonnes of grains last year.
It's ok though. The deflationists will say the two year high in grain prices is purely imaginary, and the tens of trillions of zero cost money pumped in the market to date, and the tens of trillions of negative cost fiatscoes about to be injected once again, will do nothing to increase record volatility and jitteryness. And, of course, as everyone knows, input costs are just that. If a bakery in New York threatens to go bankrupt as a result of surging raw material prices, all they need to do is join a union, and Obama will subsidize the losses on a per loaf basis into perpetuity. It appears the deflationists are right as usual.
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Prechter/Mish promised me a price crash and all I got was this gigantic food bill. Food hoard, snitchez.
Great grain robbery redux?
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7927138/Wheat-storm-will-soon-blow-itself-out.html
Eric deCarbonnel promised me a price meltup and a food crisis. I think he's closer to the truth.
Prechter/Mish promised me a price crash and all I got was this gigantic food bill.
Priceless!
whew! Got my grain bill filled just in time..55lbs. two row cyrstal malt @ $28 or put another way less then $6 per 2 cases of beer :P
Dustbowl 2.0
Sounds like the opening lines of Red Dawn:
"-- Soviet Union suffers worst wheat harvest in 55 years."
Wolverines! I know, getting tired. I love thatmovie, though.
Love it too. Apparently a 2010 remake is coming, with USSR replaced by China.
Red Dawn release got pushed back to 2011. Apparently MGM is going bankrupt and they don't have any money to market it, so they are going to wait until they can sell the company (and movie).
The movie has a very realistic plot...10 years from now, well after the U.S. has collapsed, China invades to take what they believe is rightfully theirs...they simply see it as foreclosing on their multi-trillion loan.
'Their using HUMAN FLESH for fuel...!!?? Those BARBAIRIANS!!!!'
Anyone know if wheat is in backwardation?
More likely contango, que no?
I need an answer, not a question.
Is it a true supply issue or just another speculative run?
It is almost never a true supply issue, just one of price and distribution.
I believe it to be the beginning of a supply issue. The world food surplus is at an all time low and has been precarious for several years now.
The new economy: Derivatives and global JIT-supply lines replace the "wasteful" storage of physical goods on the assumption that The Market is efficient at scaring up goods when goaded with money (And Nobody ever welch on a derivatives contract).
Supply only possible in the very very near term.
Wheat isn't a non-renewable like oil so there will always be more in the future.
This will be a bubble. There is no TRUE supply concern. part of the curve is backward. Pure speculative bullshit
Well then, it's all just dandy then. You know for a while there I really thought the world was heading into a food crisis. Boy is my face red.
Yes, wheat is in backwardation.
http://www.commoditycharts.com/quote.asp?sym=ZWU0&mode=i
Thanks for the link.
you're most welcome.
No need to worry, Bernanke's going to stimulate us out of this....
All of this has nothing to do with Russia it is the arbitrage of price between the United States and China(price were higher in China and then they started to import!!!
If They Can’t Afford Wheat Let Them Buy Real Estate? Why the Price of Food Will Guarantee a Chinese Real Estate Crash
The arbitrage in corn prices is being closed via a surge in exports from the United States to China:
China has purchased more U.S. corn this year than at any point since 1995 as soaring domestic prices and rising needs for livestock feed have boosted China’s demand for corn from the world’s top exporter.
One cargo of U.S. corn has already landed in China and started unloading and two to three more are scheduled to begin loading at U.S. ports this week, tempering at least some fears that China could not take delivery of the corn.
Only a month has passed since these articles were published and yet wheat prices have risen almost 50% from their lows, while corn and rice prices closely followed
If They Can’t Afford Wheat Let Them Buy Real Estate? Why the Price of Food Will Guarantee a Chinese Real Estate Crash
Actually, this has everything to do with Russia. From the USDA:
It is true that Chinese have imported corn for the first time time since '96. Their corn crop was not optimal due to late plantings and adverse weather, but make no mistake, the russian wheat story is about Russian wheat.
This is very bullish for corn.
Interesting. If Mother Nature really wanted to fuck us all (as I'm sure she will at some point to restore some "balance" to this place), she can just berated the world with bad weather for one year, and presto.......not enough food to go around!
It's time to cull the herd.
The ancient Egyptians kept 7 years of grain in their granaries for just such occasions. Why are we so much dumber than the Egyptians?
Wheat is really the onlly agricultural commodity (apart from livestock and cotton) that will keep that long. Most everything else will spoil in the bins over time, and thus needs to be consumed and replenished periodically.
7 years of inventories? That is soooo retarded. Who needs inventories when you can have all the futures you want? Plus you can make a sidebet on those too. The casino is open for one and all.
Since when is the decreased supply of some good "inflationary"?
http://en.wikipedia.org/wiki/Supply_shock
Inflation is always and everywhere a monetary phenomenon. Changes in the supply of goods and services are changes in those supplies. Obivously, sharp drops in some supplies will increase prices. However, as the drop in the supply of slide rules shows, not always.
Wheat is to slide rules as X is to computers.
We've been looking for 'X' for a long time...try though we may, we can't convince cattle to eat rice cakes.
Let's demolish 50% of all houses.
That will be very inflationary right?
It would be less deflationary...I'd recommend sticking to the unoccupied ones.
It would diminsh the supply of houses, but wouldn't create house price inflation unless the demand (money chasing said houses) increased above what it was to begin with (lack of demand for the available swollen supply of houses) is to blame for the ongoing fall of house prices.
the decreased supply is not but the increased demand from china is. They have been printing money like crazy and now they are importing like crazy from the United States
China’s Food Price Inflation Is Starting To Affect the Rest Of the World
"Global warming is a scam!" (idiot manipulated by the Big Oil - BP, Chevron - who thinks that "if Al Gore says it's true it HAVE to be a lie")
Because we all know climate does not change due to natural forces. Before the industrial era there was not climate change at all, for billions and billions of ears. That little Medieval Warming period was probably alien SUVs...And the mini ice age, that was probably something else...yeah aliens or man did that not the big ball of fusion fiery death in the sky. ..
Oh and why is it that BP was first in line back int eh day for a cap and trade system if they are against the idea of man made global warming?
Odd how the same people who predicted global cooling in the 70s called for warming in the 90s...it's almost like they just look at a short term trend and then try to feed it to us as "science".
Natural climate changes NEVER happened so quickly, never happened in a matter of 3 or 4 decades like now. It took centuries or millenia.
The Vikings of Greenland would disagree with your warrantless claim.
Right, in the planets history there was never dramatic changes. So tell me what happened to the dinosaurs? The truth is the planet changes. Hell what about the radical climate change on Mars or the moons of Jupiter? Maybe that was man made to? The Viking lander and the spirit rovers messing with Mars?
Anyway how to solve it? Cap and Tax is admitted to not work. And the indulgence system is so dark ages. So culling the pop I suppose, "liquidation" and forced sterilization. Who lives and who dies?
Absolutely not true
as per the Greenland ice-core sample record which is closer to a long-term, exact record of historic global temperature change than anything else known to exist: http://en.wikipedia.org/wiki/Dansgaard-Oeschger_cycles
Oh, of course... We're experiencing a Dansgaard-Oeschger event right now... What a coincidence! Just at the same time when the parts per million of CO2 in the atmosphere are skyrocketing, thanks to massive human-made emissions of this greenhouse effect gas. Maybe you should want to deny the existance of greenhouse effect gases, but the atmospheric temperatures on planet Venus can't agree with you.
I wasn't presenting a big picture analysis. You made an assertion and I proved that assertion to be incorrect. Deal.
You don't know what the damn weather is going to be like in 20 years any more than I do but I don't see how anyone can look at long term records like this and not conclude that anthropogenic factors, however pernicious, aren't a drop in the bucket compared to the larger natural forces clearly at work. If we are in fact overdue for another ice age, as much data seem to indicate, man made global warming may actually be a good thing for most temperate zone life.
The global warming (sorry, now 'climate change') debate has devolved into blaming all weather Leftists don't like on people's refusal to cede ever more control over their own lives to unelected government officials accountable to no one.
And sorry, but that's just bullshit.
but what of the common reply that CO2 levels in the historic record always follow warming with a lag and has never lead to warming? It's also been higher in the past. It's also something I produce simply by breathing.
Why is it that socialists are always so incompetent in anything and everything they comment upon? Is it just because you guys always take the party line without question, or what?
Am I a socialist? Really? Thanks, I didn't know... But if you're saying, I must be...
Anyway, I'm thousands of times more competent than you on hundreds of issues and subjects, and I have no doubt about it.
More than 50% of your comments are socialist in nature.
If it walks like a duck, quacks like a duck, etc etc.
Global warming zealots (and it is very close to a religion) seem to have never taken Statistics 101 where we learned "correlation does not imply causation". The Earth is warming => man-made carbon is causing it. That link has not been proven. The Pacific Northwest has had the coolest Summer in 70-odd years, but did Mankind cause that?
Although climate change is a natural ongoing phenomena, the change in the chemistry in the atmosphere is definitely a result of man's activities. The man-mad climate change theory is dependant on the appearance of the "greenhouse effect" as a result of these chemical changes to the atmosphere. It is a theory generally accepted by scientists not motivated by self interest or influenced by the industrial cartels who see the adoption of "green measures" a threat to their profit stream.
Let them eat cake!
http://www.youtube.com/watch?v=-q4LvXZNOuI
Further proof ZHers dont have the best taste in music.
maybe the market is pricing in some de-valued dollars
No need to fear. I'm certain the central banks can print up some wheat into existence. They are magic after all right?
Did I hear "famine"? Well that should be good for 20 pt on the S&P. Food shortages are good for the markets.
</sarcasm(for the clueless)>
Depopulation is the answer to future solvency. They know the denominator needs to get whacked somehow.
ToNYC
I've seen Hell comes to Frogtown. And we all know how worn out Sean Connery looked by the end of Zardoz.
You are talking about MALE depopulation right?
A supply shock is only inflationary if it triggers an increase in velocity (people respond by spending more money or spending it faster) or if the government responds by trying to offset the cost with looser money.
Right now, bigger food and energy bills means less money to spend on discretionary goods and services. Without intervention, that is deflationary.
It is neither deflationary nor inflationary, in and of itself. It is simply an adjustment to a change in supply. Some prices will rise, others will fall. The production structure will adapt. Gov't interfering with that adjustment with an arbitrary change in the supply of Fiat will hamper the adjustment process.
You are correct, the adjustment of prices is neither inflationary or deflationary in and of itself. However, human behavior is not always textbook and the reaction to changing prices is sometimes self-reinforcing rather that corrective, especially because we live in a fractional reserve fiat currency system.
In the present case, I was thinking of today's credit economy. Higher food and energy prices are destructive of credit (or will hamper the growth of new credit as old debt is repaid) and therefore the result will be deflationary.
Black swan event.
Its going to take something like this, beyond control, to destroy this stupid mirage of invincibility the CB's have erected.
And when this too is swept under the propaganda rug?
Here, this one's for free:
This is a great opportunity for the US to once again become the breadbasket of the world.
I'm not sure that ever actually changed. US has been a net ag exporter since the midwest was settled, so far as I know, though I haven't looked in the last few years.
It will. The water fueling that is from one super huge underground lake under most of the mid west. So it's mostly ground water being used. Problem is is that water is being pumped MUCH faster then the refresh rate. Sooner or later it's going to get to costly to pump that water from the depths. That will put a huge dent in the agg there.
This is only true for irrigated crops in the Western Plains states that grow wheat and irrigated corn. The vast majority of corn and soybean production in the midwest is NOT irrigated. IA, IL, WI, OH, MO, MI....not irrigated.
You are talking about the Ogallala aquifer, which is being depleted at shallower depths (such as my area), but further north, there remains many years supply of water (about 250 at current depletion rates, assuming NO recharging).
Farmers in my area have mostly turned away from using the aquifer, due to the depletion issue, but areas further north, such as Kansas, recharge quickly, and have a much deeper saturated thickness. Being highly informed on the issue (and having spoken with many local geologists and hydrologists on the subject), I have noticed some peculiarities that point to a much faster recharge rate than claimed, as the area under Lubbock has become fully resaturated in the 20 years since they stopped using well water. I don't know what the source of all that water is, other than rainwater recharge. If it is indeed being recharged by rain, it must be by some other pathway than the playa lakes. It has simply moved too fast.
http://en.wikipedia.org/wiki/Ogallalla_Aquifer
Time for the CIA to pull a few dirty tricks out of their bag. Rust Bitches!
http://www.marketskeptics.com/2010/08/2010-food-crisis-is-here.html
*****The 2010 Food Crisis IS HERE!*****by Eric deCarbonnel
Last December, I published a major article ( *****2010 Food Crisis for Dummies***** ) explaining why the world was heading towards a major food crisis in 2010. Well, the 2010 Food Crisis IS HERE!
Shortages have driven up prices and we are now entering the next stage of the food crisis. Some of my long time readers will remember my March follow-up entry ( *****2010 Food Crisis Taking Shape***** ) in which I laid out the three stage of the food crisis.
… What is going to happen next is simple:
A) Prices will rise driven by growing shortages.
B) The fear of price collapse in soybeans will fade away and doubts about the USDA will grow (ie: “if the USDA’s numbers are right, why are prices still going up?”). As end-users try to get out of their underbought and oversold positions, the price rises will accelerate.
C) Panic explodes as faith in USDA numbers collapse. Everyone becomes a spot buyer.
Stage A of the food crisis (shortage-driven price spike) has occurred. Now we are entering stage B (confusion, growing doubts in government estimates, accelerating price rises).
http://www.marketskeptics.com/2009/12/2010-food-crisis-for-dummies.html
*****2010 Food Crisis for Dummies*****by Eric deCarbonnel 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.
The 2010 Food Crisis Means Financial Armageddon
Over the last two years, the world has faced a series of unprecedented financial crises: the collapse of the housing market, the freezing of the credit markets, the failure of Wall Street brokerage firms (Bear Stearns/Lehman Brothers), the failure of Freddie Mac and Fannie Mae, the failure of AIG, Iceland’s economic collapse, the bankruptcy of the major auto manufacturers (General Motors, Ford, and Chrysler), etc… In the face of all these challenges, the demise of the dollar, derivative markets, and the modern international system of credit has been repeatedly forecasted and feared. However, all these doomsday scenarios have so far been proved false, and, despite tremendous chaos and losses, the global financial system has held together.
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.
Just the link would've been fine, thanks.
forgive me for smelling "Conspiracy " here...but nowadays i do almost everywhere....but this could not be just an accident.......i would like to thank the russians for the Copenhagen screw job....but i always have this feeling that Putin might be one of them...i hope i m wrong
The Sun is effecting allot this month and year , it is supposed to be a solar minimum but it is still very active.
http://www.spaceweather.com/
Local and regional weather has more to do with changes in the earth's magnetic field than the variations in solar output. Currently, the magnetic north pole is galloping toward Russia at an increasing rate. Moscow has also over-mined and mismanaged underground water levels, and is now slowly sinking. Naturally, the fracturing of rock crystals and friction beneath the area has lead to some cool light shows and is now preventing proper cloud formation. It would not surprise me in the least if a major earthquake were to hit Moscow within two years. But their budget is tight and no one there wants to listen to the scientists sounding alarms and asking for more funding.
A measure of wheat for a denarius, and three measures of barley for a denarius
At what point in time (I need to know how much my denarii have been debased)?
In other words, isn't Putin simply saying his wheat isn't worth selling for those quickly-shriveling FRNs?
No, it's an excuse to drive up prices. Expect the export ban to be lifted shortly. Last I checked, U.S. does not buy wheat from Russia. I don't even think there is a Russian wheat contract.
Never mind.........it recently started trading on the NAMEX wing of MICEX.
Have you ever held a real denarius? About the size of a dime, about the weight of a nickel. I would estimate about 1/5 of an ounce of silver, so we're talking about a $4 coin. So, a denarius would approximately buy a loaf of bread. Interesting that values don't change that much over time.
Hey, something America makes that the world needs, now in demand.
We'll take it...
yeah and if we export all that wheat, you'll be eating lettuce sandwiches, if you can find a Mexican to pick that lettuce.
I use the cardboard boxes from my electronic gadget imports.
Nutritious AND delicious.
As you know, bread is made from flour, which is made from wheat (unless it is made from rye). So we will be eating our lettuce sandwich between 2 leaves of lettuce. Carbs are bad for you anyways. We will all lose weight!
Marc Faber predicted that Wheat would be the big winner in 2010. How many friggin times does this guy have to be right?
One more time than he's wrong, with enough leverage.
I seriously doubt Faber knew that Moscow would get quite this hot.
For a city that sees an average high of 75 degrees F to suddenly experience temperatures over 100 degrees F for days and weeks... Well, I can't think of when it's ever happened before.
It's such big news that no one is touching it.
I'm not just talking about yesterday. Look at Wheat's rally from the bottom. It started well before the Russian announcement.
You're right. I was just being dramatic.
It's like oil, which was going to start rising in price before the GoM spill, as well.
These unpredictable events seem to hasten the inevitable, sometimes.
Anyone know if those Russian brides advertised here accept US wheat as payment?
No, but they'll be checking their crevices for stalks on exit.
Yeah right. Revelation 6:6
I warned you.
let them eat their oil. yummy!
Does this mean CPIU will rise? Darn, that means my child support payments will rise too.
Of course not, the CPI doesn't go up when prices rise. In fact, when all the food stores start shrinking the size of their products, the CPI will go down because they take up less space on the shelves. More boxes, less space, more efficient.
or the CPI will not rise until food (and or energy) cost increases are passed on to the real economy(oxymoron), which is wages (nope) housing (double dip in asset devaluation appear imminent), or clothing (hows cotton doing?Who cares, see wages) You have to admit food prices have been moderate despite the foreshadowing that this day would come, and yes, Obama and his peple do have some influence at the commodity exchanges, where they can control the number of contracts, and margin and so on, preventing speculators from running up the price of anything (setting a fair price). And as long as SNAP is going so well, the price of dinner is on uncle (and those who don't have SNAP can make up the difference, just as savers subsidize borrowers). but you said it more succinctly i believe. Inflation, inflation, we got no stinking inflation?
the last time Wheat prices spiked up in 2008, I witnessed about 5 nearby bagel stores close up shop. Of course, coffee had spiked up at the same time for a double kick in the balls.
The Fed needs to lower the interest rate and offer lower priced loans to spur wheat production. Because paper can change the weather, soil, climate, everything. This is a fundamental tenet of economics.
The price rise will cause all kinds of other producers of wheat to start filling the demand. Hell, I think I may start a farm on Antarctica because more demand=more wheat
Pizza shops also suffer.
The national chains large pizza will be 6 inches across if this keeps up. Personal pizza no more.
This story (in my opinion) has the potential to be huge with ripples from it spreading all over the world. The Middle East countries have enormous population growth rates, lots of oil, lots of dollars, but are huge food importers. The Russian situation points out why if countries are not self-sufficient in food production they are playing Russian Roulette. Will they sell dollars and dollar-denominated assets for wheat? What happens to their domestic populations when bread prices soar? Will they switch to corn and come into direct competition with China for corn supplies. Things are going to get volatile.
Beef cattle prices are up at auction. I got $1.40 and $1.50 last auction. Historical, my highest price was $1.12 a couple of years back. Normally around a buck a pound. Hay is $55 for a 1000 pound roll, up from $30 two years ago. Went into Webers day old bread store last week and paid $1.50 for a large loaf of Texas Toast. Barbed wire is $75 a roll. I have not bought any in a couple of years, when it was $25, which I thought was high. Copper and oil up. There will be no new truck and I dont remember what a vacation is/was.
"Russian Scholar Warns Of 'Secret' U.S. Climate Change Weapon"
http://www.rferl.org/content/Russian_Scholar_Warns_Of_Secret_US_Climate_Change_Weapon/2114381.html
hmmm, no bread, no bacon.....if american idol was cancelled americans might actually start paying attention (either that or the obesity rate won't be going up at the same rate as the national debt).
Pork Bellies, Used to Make Bacon, Soar to Record $1.185 a Pound in Chicago:
http://www.bloomberg.com/news/2010-08-05/pork-bellies-used-to-make-bacon-soar-to-record-1-185-a-pound-in-chicago.html
“There are just no stocks now, no frozen bellies around,” and U.S. supplies can’t meet consumer demand for bacon, said Tom Cawthorne, the director of hog marketing at R.J. O’Brien & Associates in Chicago.
Higher priced bacon? Might as well stab me in the heart! I better go out and load up, come on freezer full of bacon!
Well, so is oil, the only factor is price. you can synthesize just about anything you get from oil, would be expensive though.
Tyler, wheat prices going up is a supply side phenomenon and nothing really to do with money supply.
Are you saying wheat should not be factored into price indexing? If we are to try measuring the loss in purchasing power for the dollar, I think wheat ought to be included.
No one is saying that supply isn't important. Otherwise, why would this article be about a drought?
Interesting SP500 chart ...
http://stockmarket618.wordpress.com
There are certainly a lot of details like that to take into consideration.I read and understand the entire article and I really enjoyed it to be honest.
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