Measured By Gold And The Dow, Wheat Is Cheap (But Maybe Not For Long)

Tyler Durden's picture


Submitted by Charles Hugh-Smith of OfTwoMinds blog,

Priced in gold and stocks, wheat is near multi-decade lows. That may not last.

Measuring the cost of anything in currency can be misleading. As we know, inflation can be gamed by authorities to appear low, and supposedly low inflation is actually high inflation if wages are declining while prices rise.

Longtime correspondent Harun I. has often recommended in these pages that we look to other yardsticks to get a more realistic assessment of price and value.

For example, what is the cost of wheat when priced in gold rather than dollars? Harun has graciously provided a chart of the wheat/gold ratio, which I marked up to identify when gold was expensive and wheat was cheap, and vice versa.

Priced in gold, wheat is at multi-decade lows; technically, this long downtrend appears to have reversed into an uptrend. If this is so, the only direction in the price of wheat (priced in gold) is up.

Here is wheat priced in the Dow Jones Industrial Average (DJIA). In essence, how many bushels of wheat can be purchased with one share of the Dow index?

In 1975, at the nadir of the stagflation-ridden stock market, wheat was expensive and the Dow cheap--once again, this is pricing wheat in the Dow, not the dollar.

At the top of the stock market bubble in 2000, the Dow was expensive and wheat was cheap.

When the Dow hit bottom in March 2009, wheat went up when priced in stock market shares.

Despite some impressive volatility since 2000, the trend in the price of wheat (when priced in stocks) is clearly up. Once again, it seems a long-term downtrend in the price of wheat has reversed and is now an uptrend.

The only way for wheat to regain its previous trading range is for gold and the Dow to both plummet or for wheat to rise in cost, i.e. it takes more gold or shares of the Dow to buy a bushel of wheat.

Priced in gold and stocks, wheat is near multi-decade lows. That may not last.Technically the trend has reversed, suggesting much higher prices--in dollars, gold or stocks--for wheat and indeed, by extension, for all food.

We may be tasting the first minimal increases in food prices that could soar to unimagined heights in the years ahead.

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Fri, 04/25/2014 - 14:29 | 4696379 SheepDog-One
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If wheat is so cheap then why are they loading bread with sawdust?

Fri, 04/25/2014 - 14:32 | 4696393 Soul Glow
Soul Glow's picture

And why are they fighting over Ukraine?

Fri, 04/25/2014 - 15:11 | 4696589 besnook
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Fri, 04/25/2014 - 16:08 | 4696947 gmrpeabody
gmrpeabody's picture

And here I thought paying $5 for a loaf of bread was expensive...

Fri, 04/25/2014 - 16:40 | 4697093 g'kar
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I won't eat it unless it's pure, unadulterated, GMO wheat.

Fri, 04/25/2014 - 17:34 | 4697295 IndianaJohn
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g'kar, -- currently, there is no comercially grown GMO wheat. But Monsanto never sleeps.

Fri, 04/25/2014 - 20:42 | 4697802 g'kar
g'kar's picture

That's why I don't eat any wheat!

Fri, 04/25/2014 - 15:38 | 4696755 mickeyman
mickeyman's picture

In Ukraine they are fighting over which kind of wheat will replace buckwheat.

Fri, 04/25/2014 - 14:40 | 4696436 Recognizer
Recognizer's picture

Gluten free is the way to be!  Sawdust on the other hand...

Fri, 04/25/2014 - 15:38 | 4696758 mickeyman
mickeyman's picture

You mean Glutenfrei

Fri, 04/25/2014 - 16:10 | 4696955 gmrpeabody
gmrpeabody's picture

I'd settle for a glutton free environment...

Fri, 04/25/2014 - 14:30 | 4696381 i_call_you_my_base
i_call_you_my_base's picture

Currency is manipulated but gold and the DOW is not?

Fri, 04/25/2014 - 14:32 | 4696397 Soul Glow
Soul Glow's picture

Everything is manipulated, but for your own good.  Move along.

Fri, 04/25/2014 - 14:32 | 4696396 unplugged
unplugged's picture

in 5 years radiation-free wheat will be really expensive

Fri, 04/25/2014 - 14:39 | 4696410 Dr. Engali
Dr. Engali's picture

"We may be tasting the first minimal increases in food prices that could soar to unimagined heights in the years ahead."


Uhmm.... hellooooo..... McFly......have you been shopping lately Charles? Or are the smaller packages tricking you?

Fri, 04/25/2014 - 16:11 | 4696963 gmrpeabody
gmrpeabody's picture

Most people are fooled by the smaller packages, my good Doctor.

Fri, 04/25/2014 - 14:35 | 4696411 NoDebt
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Welp, I guess there's nothing left to do but put up a government mandate to start burning wheat for fuel.

Fri, 04/25/2014 - 14:38 | 4696422 put_peter
put_peter's picture

Monsanto! Who wants to eat wheat anymore...


Fri, 04/25/2014 - 14:38 | 4696424 Recognizer
Recognizer's picture

People still eat wheat?

Fri, 04/25/2014 - 14:39 | 4696430 Grande Tetons
Grande Tetons's picture

OT. Any FX traders notice that volatility took the day off today?  

Fri, 04/25/2014 - 14:47 | 4696440 ebworthen
ebworthen's picture

Well, the price of Gold is artificially suppressed with bankster paper gold schemes, and the DOW is artificially inflated by FED QE gravy - so I find these charts spurious.

Try pricing wheat in Yuan, or the Rupee, or the Ruble - if you want to see the cost for the hungry masses who really need it.

Fri, 04/25/2014 - 14:45 | 4696462 besnook
besnook's picture

china may have just stopped the gmo debate by refusing gmo products(natably wheat) for import. is this the real reason for the low price?

Fri, 04/25/2014 - 14:47 | 4696471 Tinky
Tinky's picture

“The modern mind dislikes gold because it blurts out unpleasant truths.”  

– Joseph Schumpeter


Fri, 04/25/2014 - 14:53 | 4696501 ParkAveFlasher
ParkAveFlasher's picture

My family hates me for the same reason!  Another Happy Easter for PAF, that anti-war goldbug kook. 

Fri, 04/25/2014 - 15:00 | 4696536 Seasmoke
Seasmoke's picture

Wheat is not good for my waistline. 

Fri, 04/25/2014 - 15:03 | 4696549 devo
devo's picture

Everything is cheap since the dollar is worth 0.

Fri, 04/25/2014 - 15:15 | 4696614 put_peter
put_peter's picture

Just curious... if dollar === 0 what do you think Yen and EUR would be worth ;)

Fri, 04/25/2014 - 15:22 | 4696648 devo
devo's picture

Just my opinion, but they are all worth 0. The bubble is in currencies. Global debt is 60 trillion (i.e. we need to print 60 trillion more, and growing, of these things to just break even). It is so clear they are worth 0. What is amazing is people will gladly give me actual goods for them. Take advantage while the going is good. Those of us who know are at an advantage. It's our payoff for paying attention and educating ourselves.

Fri, 04/25/2014 - 15:53 | 4696865 q99x2
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Don't know about wheat but the rice I just bought at Trader Joe's just went up 10% from 2.99 to 3.29

Fri, 04/25/2014 - 17:28 | 4697274 IndianaJohn
IndianaJohn's picture

Based on the near month, future contract price, the wheat in a one pound loaf of bread pays the farmer about 15 cents.

Fri, 04/25/2014 - 19:52 | 4697681 Milestones
Milestones's picture

During the American Agriculture farm strike in 1977 I can  remember that the money spent on the plastic bag was  more than the farmer received for his wheat, About $.04 per loaf. Some things just don't change do they?? The most imprtant person (farmer) got shit. Nothing has changed.

Ever eat a plastic bag? Ummm.                  Milestones

Fri, 04/25/2014 - 18:20 | 4697438 gosh
gosh's picture

because of the anti glutton fad dont expect wheat to bounce anytime soon

Sat, 04/26/2014 - 00:14 | 4698169 TBT or not TBT
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Viewed on a timeline starting at the beginning of hominids' existence, growing and eating wheat is a fad, as is civilisation and farming.

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