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Asian Contagion Strikes Again Thanks To US Drought

Tyler Durden's picture


With the heat-wave in Southern Europe, the missing Monsoon, and the earth-cracking drought in the US, it is no surprise that corn, wheat, and soymeal prices are soaring as crop yields plunge. The level of inventories were already low going in and as Bloomberg notes, consumers around the world will feel the effect of higher food prices as the worst drought in 50 years impact the world's largest exporter of corn and wheat (and 3rd largest of soymeal). Within Asia, Korea and Malaysia will be most adversely affected, considering direct effects referenced in per capita and GDP terms. Indonesia and Japan are Asia’s largest importers of wheat, both importing roughly 5.7 million metric tons on average. China is by a wide margin the region’s largest importer of soy, with average imports of 49.9 million in the last five years. The impact on headline inflation in Asia will be stronger for the economies with lower per capita incomes — Vietnam, India, the Philippines and Indonesia — where food and food products account for a larger share of the typical consumption basket. Even in places where incomes are high, such as Singapore, food accounts for 22 percent of the consumer price index.

And while central bankers tend to view these price shocks as 'transitory' and are less likely to 'act' and paradoxically while food price inflation may raise inflation expectations, in a world of slow/low growth, it may have a rather deflationary impact as finite spending is redistributed from discretionary to staples.



Source: Bloomberg Briefs

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Thu, 07/26/2012 - 12:42 | 2653616 bonddude
bonddude's picture

Dustbowl bitchez !

Thu, 07/26/2012 - 12:49 | 2653636 Let The Wurlitz...
Let The Wurlitzer Play's picture

Its funny how things repeat over time.

Thu, 07/26/2012 - 13:04 | 2653694 camaro68ss
camaro68ss's picture

Got no peas to eat bitchez

Thu, 07/26/2012 - 13:11 | 2653717 Lost Wages
Lost Wages's picture

Natalie Merchant, bitchez.


Fri, 07/27/2012 - 02:48 | 2655646 dubbleoj
dubbleoj's picture

its ok, i just helped save my korean company save close to $100M in shipping costs using ZH market analysis, we can afford more expensive shitty korean bread for the meantime. suck on that geico lizard (and fuck you buffett!)

Thu, 07/26/2012 - 12:54 | 2653657 LMAOLORI
Thu, 07/26/2012 - 12:46 | 2653629 DOT
DOT's picture

Now that the food markets have priced a global perspective on drought and famine it is important to examine our individual supply chains.


Thu, 07/26/2012 - 12:50 | 2653643 ebworthen
ebworthen's picture

You mean to say that people need to eat?

Isn't there an app for that?

Thu, 07/26/2012 - 13:29 | 2653777 _ConanTheLibert...
_ConanTheLibertarian_'s picture

astute observation

Thu, 07/26/2012 - 14:07 | 2653873 Crack-up Boom
Crack-up Boom's picture

Let them eat Ipads (if they have an "app"etite for them).

Thu, 07/26/2012 - 12:52 | 2653650 bonddude
bonddude's picture

"then let them die and decrease the surplus population. - Ebeneezer Scrooge

Thu, 07/26/2012 - 12:52 | 2653651 Hype Alert
Hype Alert's picture

You didn't grow that.  Somebody else grew that.

Thu, 07/26/2012 - 12:54 | 2653653 Vegetius
Vegetius's picture

There will be Blood

Unless your a well insulated banker. - Quote time -

“Out of kindness, we stopped the predators, and the deer herd expanded until it starved. Out of compassion we taught the primitives hygiene, and their death rate plummeted, their population exploded, and then famine. Out of empathy we sent food and taught them to live with other tribes under the same government. Again their population doubled, and famine set in with genocide. The scale of suffering had only been magnified by the hubris of liberals trying to do good.”
  -Perry Lorenz

Thu, 07/26/2012 - 13:33 | 2653793 Bastiat
Bastiat's picture

"Heaven-and-Earth is not sentimental; It treats all things as straw-dogs."  -- Tao Te Ching

Thu, 07/26/2012 - 12:54 | 2653654 haskelslocal
haskelslocal's picture

Nothing more than an obesity diet campaign.

Thu, 07/26/2012 - 12:54 | 2653658 mayhem_korner
mayhem_korner's picture



This means already-negative real interest rates have fallen further.

Thu, 07/26/2012 - 12:55 | 2653663 marcusfenix
marcusfenix's picture

the drought conditions are expected to last through at least November, with another mild, dry winter on tap next year could be worse that this one, much worse.

I have made it a point to learn more about gardening becoming more responsible and involved in supplying my own food. I would strongly encourage anybody with a sense of self preservation to do the same, as I suspect this is going to be a bigger deal than most of the wal mart zombies currently realize.



Thu, 07/26/2012 - 13:15 | 2653728 WillyGroper
WillyGroper's picture

>>>>>I have made it a point to learn more about gardening becoming more responsible and involved in supplying my own food.

Good on ya. Smart thing to do. There's alot of people here that grow their own & have some great input on self sufficiency.

Thu, 07/26/2012 - 12:56 | 2653666 Duke of Con Dao
Thu, 07/26/2012 - 12:56 | 2653670 buzzsaw99
buzzsaw99's picture

A vampire squid can't make an[sic] bonus omelet without cracking a few poverty stricken eggs.

Thu, 07/26/2012 - 12:56 | 2653672 Vincent Vega
Vincent Vega's picture

Que global warming wanker's posting(s) coming in 3...2...1...

Thu, 07/26/2012 - 13:01 | 2653683 kralizec
kralizec's picture

I H8 glowbull warmink wanker's!

Thu, 07/26/2012 - 13:06 | 2653700 Quinvarius
Quinvarius's picture

What do you call it when it gets real hot and the weather goes apeshit as global warming wankers predicted?

Thu, 07/26/2012 - 13:15 | 2653727 Vincent Vega
Vincent Vega's picture

I call it global warming wanking. Change one word in the headline of this article (drought) to rain, hurricane, snow storm, sleet, freezing rain, hail, or any other weather condition you can name and the AGW wanker's will make the same arguments that it has to be AGW..

Thu, 07/26/2012 - 13:18 | 2653738 Quinvarius
Quinvarius's picture

Maybe.  But for today, it is friggin hot and a drought.  Global warming!

Thu, 07/26/2012 - 13:23 | 2653753 Vincent Vega
Vincent Vega's picture


Thu, 07/26/2012 - 13:01 | 2653685 Missiondweller
Missiondweller's picture

Another rice shortage will also be coming which will effect those same poorer countries like Vietnam.


A second chance for an "Asian Spring" to rival the Arab Spring".

Thu, 07/26/2012 - 13:04 | 2653697 magpie
magpie's picture

Vietnam is an exporter

Thu, 07/26/2012 - 13:03 | 2653689 reader2010
reader2010's picture

They'll dine at KFC and McDonald's instead.

Thu, 07/26/2012 - 13:05 | 2653699 ParkAveFlasher
ParkAveFlasher's picture

Now it makes more sense to me that all of these importing nations have been loading up on expensive commodities, namely China.  They could be looking to offset political pressure from the US firehosed through payment for US grains in USD ... you see, the offset of that cornholing could come by paying with alternative currencies, or barter, or some combination of those involving intermediaries / third parties who may broker a deal.  Could the US counter by eating the grain / incinerating it / turning it into long-life Crispix?  That would imply subsidy/insurance/hedge payouts to the US producers via the Federal Govt.  MFG anyone? 

QE3 on its merry way, and the starvation of China commences.  WWIII coming to a Chinese sea near you!!!


Thu, 07/26/2012 - 13:17 | 2653731 FRBNYrCROOKS
FRBNYrCROOKS's picture

Don't hold your breath. China has ample stockpiles of everything except spoiled, 20 something year old, plump, white chicks with dye blonde hair.

I'm going there over Christmas break. I'll let you know.

Thu, 07/26/2012 - 13:33 | 2653788 ParkAveFlasher
ParkAveFlasher's picture

Ample stockpiles?  OK then, no big deal.  Thanks.  Just checking.  Let me know.

Thu, 07/26/2012 - 13:07 | 2653703 Jason T
Jason T's picture

higher food prices... what about higher starvatin rates?  Middle east is gonna blow again.  

Thu, 07/26/2012 - 17:41 | 2654765 Element
Element's picture

It's ok, ... we have plastic rice technology ...


It made from hydrocarbons ... oh, wait a minute ... doh!

Thu, 07/26/2012 - 13:08 | 2653710 ohhhhhbaaaaahhh...
ohhhhhbaaaaahhhhhhhhhmaaaaaahhhhh's picture

LOL... i just had a convo with a dumbass... he called zerohedge right-wing conspiracy theorist... He says the economy is fine, that bailouts are essential, and manipulation of markets are fine... How can people get so stupid? 

Thu, 07/26/2012 - 13:18 | 2653735 WillyGroper
WillyGroper's picture

>>>>>> How can people get so stupid? 

Because they believe unclescam will take care of & protect them.

Thu, 07/26/2012 - 13:21 | 2653748 Quinvarius
Quinvarius's picture

No consequences for being stupid...yet.

Thu, 07/26/2012 - 14:11 | 2653889 Crack-up Boom
Crack-up Boom's picture

I told someone about ZH a couple of weeks ago & now have a convert.  All you can do is try - then it's up to them.

Thu, 07/26/2012 - 18:40 | 2654919 Element
Element's picture

The horrible reality is that the day-to-day majority are dumb, complacent, and completely not a bit interested in shit like reality.  I see these people in great profusion, they are not 'awake', they will never be awake, no matter what happens in the world and no matter how bad it becomes for them.  They do not pay attention, can not join the dots, because they're not capable of doing so. Plus any with the potential to do so, have been systematically mind-fucked so that they mostly can't.  All they will ever manage is deep confusion and ignorance, at best.

I watched a functional middle-aged adult idiot go into a shop this week, where he bought a cap that he didn't need (his fat wife was saying how he always buys stuff at every shop) and it had a completely moronic catch-phrase above the peak. Something so childishly and stupid that you'd NEVER wear it around.  So I looked at that dismal blue cap, and realised there's a savvy manufacturer out there, who fully grasps that there are a large number of people like this guy, and no matter how stupid or idiotic their product is, if it's the right colours and the accepted shapes, and still cheap enough, but doesn't immediately fall apart, then there are a large number of gibbering cretins who are still going to buy it.

The vast bulk of people are not discerning, they don't know their ass from their elbow, and that's how humanity rolls.  What happens at zh is an anomalous outlier within a background noise of egregious dumbness.

Fri, 07/27/2012 - 00:35 | 2655566 AurorusBorealus
AurorusBorealus's picture

They believe because the LIE is so big.  Hitler understood this.

Thu, 07/26/2012 - 13:13 | 2653724 Lost Wages
Lost Wages's picture

Maybe now they'll finally stop putting corn and soy in everything under the sun and stop feeding it to animals that aren't even meant to eat it, like beef cattle. Or maybe they'll start making everything out of insects and buckwheat husks.

Thu, 07/26/2012 - 14:26 | 2653944 SwimmininNawlins
SwimmininNawlins's picture

You know that will not happen.  Corn industry likes money too much.

Thu, 07/26/2012 - 13:19 | 2653741 NEOSERF
NEOSERF's picture

As with the metals, expect evil speculators to be vilified and margin hike to commence immediately bringing relief like a hard rain on all investors...

Thu, 07/26/2012 - 13:21 | 2653743 Dr. Engali
Dr. Engali's picture

Maybe if we didn't burn corn in our fucking gas tanks we could feed a few more people.

Thu, 07/26/2012 - 13:21 | 2653744 NEOSERF
NEOSERF's picture

Where's the export country and net import charts?

Thu, 07/26/2012 - 13:21 | 2653747 lindaamick
lindaamick's picture

Weird that the drought in the midwest of the depression years of 1933-36/37 along with the Dustbowl, might end up repeating itself during this depression.

Makes you wonder....

Thu, 07/26/2012 - 13:28 | 2653773 Hype Alert
Hype Alert's picture

Bernanke's out for more printing may come back to bite him.  A drought will cause increased prices, but the FED's mandate is stable prices.  He therefore should be attempting to offset the rise in prices and not use it as an excuse to inflate everything else.  The FED and congress painted themselves into this corner and then nature comes along to make it worse.

Thu, 07/26/2012 - 14:00 | 2653861 Tirpitz
Tirpitz's picture

The article sounds a good bit like fearmongering.

Global wheat inventories are chock-full, the US corn harvest is - despite the drought - forecast to beat last year's giant 12.36 bn bushels. At the same time, high corn prices brought ethanol production to an all time low. Soybeans may recover, too, if some rain hits. So betting on further price appreciation, well, do it at your own risk.


Thu, 07/26/2012 - 14:11 | 2653893 Arnold Ziffel
Arnold Ziffel's picture
Dead cattle, devastation in wake of Western fires


VOLBORG, Mont. (AP) — Cecil and Delores Kolka thought they escaped the worst of the Ash Creek Fire when the 390-square-mile blaze spared their home and several pastures as it ripped through the couple's Montana cattle ranch.

But when the family went to round up their livestock they encountered carnage — the charred and bloated bodies of an estimated 400 cows and calves killed as the fire torched a series of narrow, thickly forested draws on the nearby Custer National Forest.





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