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Is Another Bout Of Global Food Inflation Just Around The Corner?

Tyler Durden's picture


While the price of food to the American end consumers has been relatively flat over the past few months (at least according to official CPI data), behind the scenes another food inflationary storm for the "rest of the world" is quietly brewing. The reason: after creeping higher all year, soybean prices are just shy of record highs. And while that may not mean much for a population that is used to dining out on 99 cent meals, soy is one of the most highly prized and used broad spectrum use food commodities around the world. From the FT: "The price of soyabeans is heading towards the record high set during the 2007-08 food crisis, which is set to reignite fears of runaway global food inflation. The surge in prices is because of falling global production levels following dry weather in Latin America and increased China imports. Soya’s wide range of use as feed for cows, sheep, pigs and poultry – and as a source for oil used in foodstuffs such as biscuits and cakes – means its high price could trigger food inflation fears." Most importantly, soy is one of China's most important agricultural imports, with soy prices very closely linked to Chinese inflation. So for all those wondering why the great Chinese goal seek model continues to confound expectations and keep coming in stronger than expected (at least in a Schrodinger sense) despite the country's economy sputtering based on both electrical usage and net trade, that's the reason: the last thing China needs in a critical political election year (ahem Bo Xilai) is a sudden spike in food inflation which would be only exacerbated by more PBOC easing. Just recall how closely the media was following reports out of China last year as many thought a rerun of the Arabian spring in the streets of Beijing was virtually inevitable.

Charting soybean prices - no hedonic adjustments here.

What is the reason for the dramatic surge in prices?

Soyabean prices have risen more than 10 per cent in the past month to hit a peak of $15.09 a bushel on Friday, the highest in four years. Other sources of edible oil, including rapeseed and canola, have also reached levels last seen during the 2007-08 food crisis.


Soyabean production is sharply down in the agricultural belt of Brazil, Argentina, Uruguay and Paraguay as the La Niña weather phenomenon has exposed fields to hot, dry weather over the past few months. Latin America accounts for about 55 per cent of global exports of the commodity. The US Department of Agriculture estimates that global soyabean production in the 2011-12 growing season will suffer its biggest annual drop in absolute terms since records began in 1965.


Alberto Weisser, chief executive of Bunge, one of the world’s largest agricultural trading houses, said that soya was the “tightest” agricultural commodity after a “shorter-than-expected” crop in Latin America.


“The market is sending a clear signal that farmers [elsewhere] need to plan more,” he told the Financial Times.

Alas, supply constraints mean there is hardly much hope for a prompt reduction in high prices:

US farmers, who supply 40 per cent of global soyabean exports, have indicated they will sow more acres with corn, and plan to slightly cut the amount of farmland for soyabeans.

The biggest loser? China, which just happens to hold the key to profit margins for the world's largest company (and by implication the US stock market), not to mention importing virtually all other US inflation.

In summary: all those saying how lucky the world has been in 2012 to avoid another food inflation round despite trillions in "flow" pumped by the world's central banks, unlike 2011 when the fireworks took place in the spring, perhaps this time around the [Insert Geographic Region] Summer/Fall will be merely delayed, if not any less involved.

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Tue, 05/01/2012 - 15:49 | 2389097 bob_dabolina
bob_dabolina's picture

Bush' fault

Tue, 05/01/2012 - 15:52 | 2389103 fightthepower
fightthepower's picture

Fuck you Bernanke!

Tue, 05/01/2012 - 15:53 | 2389107 NewThor
NewThor's picture

W. Bush appointed Bernanke, right?

Good call, Bob!

Tue, 05/01/2012 - 15:55 | 2389119 bob_dabolina
bob_dabolina's picture

Obama reappointed him.

Tue, 05/01/2012 - 16:01 | 2389146 NewThor
NewThor's picture

Aye. Yes. Bush and Obama's fault. + Congress. And We the People who allow this to continue.

Seriously, look at the economy since Bernanke took over.

The banks are all addicted to -5% borrowing rates, and if the punch bowl is taken away, everyone at the party would collapse.

Tue, 05/01/2012 - 16:32 | 2389245 NewThor
NewThor's picture

24 (4.0+) Earthquakes in the last 24 hours.

So if the May 20th serpent's eclipse does bring an Earthquake that wipes out 2/3rds of the world's population, would that cause food prices to go up or down?

Tue, 05/01/2012 - 17:43 | 2389456 blindfaith
blindfaith's picture

Oh PLEASE!!!!!!  They is no relationship between food prices and the number of people on the planet.  So, ok 2/3 of the folks go meet their maker and soy will still be $15.99 a bushel.


So guess what crop is getting plowed over in the USA to grow more GMO Soy ( thanks Monsanto) why RICE !!!!!!!

Chop Chop

Tue, 05/01/2012 - 21:07 | 2389840 prole
prole's picture

Rosenvelt plowed over crops during great depression I while Americans were hungry. Growing Rice in the US is an agricultural farce anyway. That's all a bunch of BS. Point - WHO CARES?

Monsatan is growing soy. Why should anyone on ZH give a Krap? We understand their perfidy and so do not eat processed poison/food so who on this website cares? Unless they are sneaking it into your dogs dogfood, that would be a concern/valid. Feed the dog raw meat and organ meat he will be fine.

As holders of gold, don't we as goldbugs expect price inflation in $ terms for consumer staples like food? While our gold goes up in value along with other items which are valuable (intrinsicly) like Beef/Fish/Fresh vegetables? As holders of gold don't we sidestep or at least keep up with price inflation (as long as AU/AG keeps up with the inflation?)

Tue, 05/01/2012 - 20:34 | 2389770 i-dog
i-dog's picture

Get a grip!

There is an average of more than 25 (4.5+) earthquakes every day (more than 9,300 last year).

Tue, 05/01/2012 - 20:59 | 2389822 mophead
mophead's picture

Eat iPads bitchez

Tue, 05/01/2012 - 22:47 | 2390032 Cathartes Aura
Cathartes Aura's picture


24 (4.0+) Earthquakes in the last 24 hours.

and six of those were in Wyoming, all shallow quakes - apparently USGS is "removing" the data & calling it "fracking" - time? 11:11 local.

full moon in Scorpio Saturday, 5 May - if nothing else, guarantees lots of bitching 'n' fighting here, as past full moons have proved, heh.

(earthquake activity ebbs 'n' flows, the solar storms can increase occurance - as can other factors - full moons effect the tides, and emergency services all can attest to being kept aware of the "full moon effect" on human behaviours, specifically, friction)


Tue, 05/01/2012 - 15:52 | 2389105 Clueless Economist
Clueless Economist's picture

Will this cause the price of soy sauce packets from my favorite chinese restaurant to go up in price?

Tue, 05/01/2012 - 16:00 | 2389143 brewing
brewing's picture

i'm long pink slime.  think it's ready for a bounce...

Tue, 05/01/2012 - 16:25 | 2389229 francis_sawyer
francis_sawyer's picture

Rising food costs is bullish!



"First, it's very important to choose the most expensive type of fish you can find for some vague environmental reason that you can then parrot back to your faux intellectual gaywad dinner party guests..."

Tue, 05/01/2012 - 16:27 | 2389236 EscapeKey
EscapeKey's picture

Only for those who can afford it.

The rest will have to switch to the BLS-substitution: cardboard pictures of steak and bacon.

Tue, 05/01/2012 - 16:55 | 2389332 Chump
Chump's picture

Indeed.  I am part of the working poor, no doubt.  If I have to choose between beer and bacon anytime soon, well, revolution...bitches.

Tue, 05/01/2012 - 16:56 | 2389337 Piranhanoia
Piranhanoia's picture

Like the drudge icon parody.  I'm long pig.

Tue, 05/01/2012 - 16:04 | 2389166 Badabing
Badabing's picture

not mine they mess with the count

Its those little packs of sugar, soy sauce, creamer……ect……I don’t know how many to use any more.

Tue, 05/01/2012 - 17:22 | 2389419 bobola
bobola's picture

Americans generally don't eat soy based food.

Its considered healthy.

Let the price rise...

Tue, 05/01/2012 - 22:01 | 2389933 Xanadu_doo
Xanadu_doo's picture

"Americans generally don't eat soy based food."


Uh, yeah, except that we eat lots of meat. And what does meat eat? Soybeans of course.


That's also why China, Mexico and India, etc., are buying beans and helping drive up the price (along with reductions in S. American yields) -- because they're feeding more pork and poultry to feed people.


Just sayin'...

Tue, 05/01/2012 - 15:57 | 2389132 Gully Foyle
Gully Foyle's picture

Goddamned I was scared shitless!

Then I read.

"could trigger food inflation fears"

What the fuck? Could triggers fears?!

Meanwhile I'm watching a steady increase in food costs and a decrease in certain supplies.

That means I am well beyond fear into numb acceptance.

Tue, 05/01/2012 - 15:57 | 2389135 battle axe
battle axe's picture

So "Asian Spring"?

Tue, 05/01/2012 - 16:16 | 2389203 Id fight Gandhi
Id fight Gandhi's picture

Guys, reminder..., reddit at 445pm Krugman is doing an AMA.

Let's make it a good one. Use a throwaway account if you have to.

Tue, 05/01/2012 - 16:30 | 2389243 EscapeKey
EscapeKey's picture

Krugman? On Reddit?

Sheesh, thanks for the warning. One giant circle jerk coming up.

Tue, 05/01/2012 - 17:08 | 2389389 Id fight Gandhi
Id fight Gandhi's picture

Yup, betcha they'll ask him about his cats or something.

Tue, 05/01/2012 - 18:31 | 2389549 krispkritter
krispkritter's picture

I like his Baked Beans. Too bad I can no longer afford them...used to be the cheapest gas around too.

Tue, 05/01/2012 - 15:51 | 2389101 NotApplicable
NotApplicable's picture

That's okay. Mad cow is going on sale now.

Tue, 05/01/2012 - 16:54 | 2389312 francis_sawyer
francis_sawyer's picture

Just like they ground up all the 'corexit' shrimp from the Gulf of Mexico 2 years ago and served it to the military as gourmet shrimp ravioli... That was one that 'Bubba' forgot to tell Forrest Gump about...

Tue, 05/01/2012 - 15:52 | 2389104 NewThor
NewThor's picture

Have you been to the grocery store?

I couldn't find a vegetable for under $2.00

Tue, 05/01/2012 - 15:56 | 2389122 penexpers
penexpers's picture

My favorite vegetable of all time, the radish, costs about $1.95/tie which is about 7-8 radishes.

$1.95 for a tie of RADISHES. RADISHES.

Tue, 05/01/2012 - 16:02 | 2389165 NotApplicable
NotApplicable's picture

Mine are just starting to get big enough to harvest.

Tue, 05/01/2012 - 16:09 | 2389175 hedgeless_horseman
hedgeless_horseman's picture



Last night's dinner was Spicy Thai Beef Salad.

Lettuce, cabbage, cucumbers, scallions, shallots, serrano peppers, and grass fed beef all grown on our home.

Do you think the central bankers can stop printing money?  I do not, so I am acting accordingly.

Tue, 05/01/2012 - 16:10 | 2389189 NotApplicable
NotApplicable's picture

You and your damn food porn! *shakes fist*

Excuse me, while I trot off to the break room for some cookies.

Tue, 05/01/2012 - 16:46 | 2389221 hedgeless_horseman
hedgeless_horseman's picture



Don't forget dessert...

The basket is one kid spending ten minutes yesterday playing pick three...eat one.  We will easily have enough berries for a year's worth of preserves, plus several weeks of dessert in a martini glass topped with fresh cream and Chambord.

Don't worry, Bernanke will probably stop printing money, right? 

Corporations will probably stop putting crap in your food, right?

The FDA will probably start testing beef intended for human consumption for Mad Cow Disease, right?

We poor country folk sure have it rough.  Pity us, please, you wealthy and urbane power elite.

Tue, 05/01/2012 - 16:55 | 2389333 Tsunami Wave
Tsunami Wave's picture

You may want to consider writing a ZH cookbook..

Tue, 05/01/2012 - 21:12 | 2389847 prole
prole's picture

I hereby challenge anyone to eat Hedgless' Dinner of "Spicy Thai Beef Salad.Lettuce, cabbage, cucumbers, scallions, shallots, serrano peppers, and grass fed beef" every day and be fat.

Tue, 05/01/2012 - 17:17 | 2389410 WatchingIgnorance
WatchingIgnorance's picture

Hedgeless . . . you the man!!!! This is what I have been trying to get people I work with to start doing. They still think food comes directly from the grocery store (like a bunch of oompa-loompas are in back making it from fairie dust . . . don't understand the reasoning myself).

Keep it up and please post more of that delicious food porn you got there . . .


Tue, 05/01/2012 - 17:20 | 2389412 TheGardener
TheGardener's picture

Pity us on the northern hemisphere , no berries yet , just about blossom...

Tue, 05/01/2012 - 17:20 | 2389413 kekekekekekeke
kekekekekekeke's picture

looks awesome. My blackberries (and by "my" I mean "the ones I pick at the park") won't be in season for another month ;[

Tue, 05/01/2012 - 18:04 | 2389492 Crack-up Boom
Crack-up Boom's picture

Awesome!  I was just showing the kids that our blueberries are still greenberries.  Should have strawberries soon, though. 

Tue, 05/01/2012 - 18:33 | 2389555 krispkritter
krispkritter's picture

I grow my own and go to local u-picks for freezer stock. Put up over 30lbs. last year, more than half from my plants. Now the chickens are getting everything from 3ft on down...that's as high as they can jump...

Tue, 05/01/2012 - 19:27 | 2389641 smiler03
smiler03's picture

Oi Hedgeless Horseman,

Why not go the full hog and show us your faeces after digestion? 

And as a final request, why not go to http://www.facebook.com/pages/My-Food-Pictures/162640767125122 and share your crap over there.

Tue, 05/01/2012 - 19:56 | 2389707 debtandtaxes
debtandtaxes's picture

...your jealousy is showing...

Wed, 05/02/2012 - 11:51 | 2391347 smiler03
smiler03's picture

Au contraire, I cook all my meals from scratch. The number of upvotes are probably from people like you and others who can't cook and only eat crap.

Wed, 05/02/2012 - 00:05 | 2390254 Braverdave
Braverdave's picture

I will be waiting a bit for blackberries from my one little baby blackberry bush in the garden but I have a row of raspberries that look like the bumper crop in the making. Planted some blueberry bushes for giggles (and blueberries) this year to replace the strawberries I gave up on last year.


Tue, 05/01/2012 - 16:16 | 2389204 Sudden Debt
Sudden Debt's picture

I think your wife doesn't love you anymore...

Tue, 05/01/2012 - 16:20 | 2389211 EscapeKey
EscapeKey's picture

No dessert until you eat your veggies!

Tue, 05/01/2012 - 16:45 | 2389290 francis_sawyer
francis_sawyer's picture

"Can't have any pudding if you don't eat your meat"



Tue, 05/01/2012 - 18:36 | 2389560 krispkritter
krispkritter's picture

What's the hardest part about eating a vegetable?...getting them back in the wheelchair...(groan)...

Tue, 05/01/2012 - 16:30 | 2389240 EscapeKey
EscapeKey's picture

I never understood why people peel cucumbers.

The peel is where the taste is. The rest is just water.

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