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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SheepDog-One's picture

If wheat is so cheap then why are they loading bread with sawdust?

Soul Glow's picture

And why are they fighting over Ukraine?

gmrpeabody's picture

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

g'kar's picture

I won't eat it unless it's pure, unadulterated, GMO wheat.

IndianaJohn's picture

g'kar, -- currently, there is no comercially grown GMO wheat. But Monsanto never sleeps.

g'kar's picture

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

mickeyman's picture

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

Recognizer's picture

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

gmrpeabody's picture

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

i_call_you_my_base's picture

Currency is manipulated but gold and the DOW is not?

Soul Glow's picture

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

unplugged's picture

in 5 years radiation-free wheat will be really expensive

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?

gmrpeabody's picture

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

NoDebt's picture

Welp, I guess there's nothing left to do but put up a government mandate to start burning wheat for fuel.

put_peter's picture

Monsanto! Who wants to eat wheat anymore...


Recognizer's picture

People still eat wheat?

Grande Tetons's picture

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

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.

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?

Tinky's picture

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

– Joseph Schumpeter


ParkAveFlasher's picture

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

Seasmoke's picture

Wheat is not good for my waistline. 

devo's picture

Everything is cheap since the dollar is worth 0.

put_peter's picture

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

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.

q99x2's picture

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

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.

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

gosh's picture

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

TBT or not TBT's picture

Viewed on a timeline starting at the beginning of hominids' existence, growing and eating wheat is a fad, as is civilisation and farming.