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Deep Fried Black Swan Lands As China Admits It Has A Food Inflation Problem, Releases Corn, Rice From Reserves
Last week we wrote an article that to many was anathema: namely an explanation why everyone is deluding themselves in their expectation that the PBOC would ease, soft, hard, or just right landing notwithstanding. The reason? The threat that food inflation is about to read its ugly head which is "Why The Fate Of The Global Equity Rally May Rest In The Hands Of Soybeans." This was merely a continuation of our observations from a month ago that as a result of the Black Swan being "deep fried" in 2012, that the threat of food inflation will keep key BRIC central banks in check for a long time. As of today the threat has become fact, because as China Daily reports "China will release corn and rice from state reserves to help tame inflation and reduce imports as the worst US drought in half a century pushes corn prices to global records, creating fears of a world food crisis...The release may prompt Chinese importers to cancel shipments in the near term and take some pressure off international corn prices, which set a new all-time high on Friday as the US government slashed its estimate of the size of the crop in the world's top grain exporter." Sure, as every other short-termist measure the world over, it may help with prices in the short-term, but will merely expose China, and thus everyone, to the threat of a much greater price spike in the future. Because just as the strategic petroleum reserve release did nothing to help gas prices, nor the short selling ban in the US and Europe did anything to help the underlying broken financial system, so this will merely force the local population to scramble and ration whatever food they can get asap, now that the government has admitted there is, indeed, a food inflationary problem.
Sure enough:
Bottom line - rationing is in full force, and given the continually declining state of the US corn crop, more will be needed," said Christopher Narayanan, head of agricultural commodities research at Societe Generale.
China's State Administration of Grain did not specify the volume of corn or rice to be released from reserves. The Grain Reserves Corp will be responsible for selling the crops, but no details were given on the timing.
Some traders estimated the government might sell around 2 million tons to help stabilize prices ahead of the harvest, when supply is usually tight.
Beijing will probably need to replenish reserves towards the end of the year, and therefore the release will have only a limited impact on prices.
"It can help stabilize the market somewhat, but the volume is too small compared with the 10 million to 15 million tons of monthly consumption nationwide," said Xu Wenjie, an analyst with Zheshang Futures Co.
...
"With USDA raising its Chinese corn production estimate ... it certainly makes sense to release some corn from reserves," Narayanan said, noting that the USDA also cut its estimate of Chinese corn imports by 3 million tons to 2 million.
One thing is now certain: with China openly admitting it is scared about the impact of food price inflation, one can forget not only PBOC cutting rates but engaging in far less effective RRR cuts. In fact reverse repos will be the only form of easing for a long time.
Which brings us to our conclusion from last week:
Barring some last minute miracle, with Soy prices set to surge on a Y/Y basis, and drag Chinese food inflation with them, will the PBOC ease, and add to incremental food demand, just as supply considerations are about to send Chinese food inflation soaring?
Of course not (naturally, this assumes the wheels of the global economy do not come completely unglued, in which case all bets are off).
So there you have it: a PBOC whose hands are tied, an ECB whose hands are tied, and a Fed whose hands are also tied (there is of course the BOJ but nobody cares about the BOJ any more).
And still the market keeps hoping and praying that despite, or maybe due to, collapsing corporate revenues, and lower corporate earnings guidance, that central banks will come in and save the day.
Alas, by now it is more than clear that any discount capacity the market may have once had, is now as gone as trading volume, the VIX, and bank trading profits.
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The G-20 is getting ready to have an emergency circle jerk.
http://www.youtube.com/watch?v=LS-oyLm-_fg
black swans grey swans and white swans i'm waiting on the golden goose
Just have the bernake print some corn and soy. duhhh
soylent green...
Deep FLIED Black Swan....they always serve that at the chinky buffet. But somehow I always think those "Black Swans" look more like....rats.
Maybe they can tap their reserve of US T bonds to buy some corn and soybeans from us? Fill those shipping containers going back to China. Americans are too fat anyway, time for a little waistline austerity.
MOO / DBA, still in my portfolio.
You guys didn't get suckered into selling off your Ag stuff, did you?
9% growth rate minus 9% inflation rate, uh we are fucked.
it is chicken drenched in fake soy sauce (caramel coloring + salt).
go to panda express.
Actually, the food inflation in China is very mild when you factor in the proper hedonic adjustments such as substitution.
For example; people who used to eat dog now eat cat; people who used to eat cat now eat rat. Everybody who was eating rice is now eating plastic rice, and the best thing about plastic rice is that it can be recycled.
Now you see that people are theoretically no worse off because of substitution. They are still eating the same quantity of food and not paying much more for that quantity.
but now they are unhappy because they know that there is something better to eat out there.
so yes substitution can happen but not without loss of mental happiness which may lead to social instability.
bernake cares not about food or energy skyrocketing.
How I long for dog...
The only question is; are they likely to (again) imitate/emulate what the West traditionally does in this situation?
(we better hope they don't)
@ahmeexnal
I wasn't going to make any further comments here as I am a zh dropout, but
THANK YOU SO MUCH for your epically long piece from last night!!!!!
It hit me like the writing of the Beats oh so many years ago
Thanks for cheering up this oldman om
You can't eat QE.
hey wasn't GMO Corn going to feed everybody?
It was those evil speculators driving up the price again.
.
At least it's feeding a new generation of mutated RoundupReady© insects.
Would ya settle for some Grey Goose?
http://www.youtube.com/watch?v=SIsf28vWU0U
http://www.youtube.com/watch?v=J04NXYkUd8c
Food holds a different place in China then in America; it's a mtter of survival there so people riot when they starve. Here, people riot when Popeye's runs out of the 50 piece chicken bucket:
https://www.youtube.com/watch?v=8pyW6w5B7Aw
Ben - "hello China, can you make some room for our next QE?"
China - "OK"
Do not forget to send emergency supply of shark fins and bear's bile, while at it.
You know it will be really serious when they release the shlimp flied lice reserves!
But seriously, they have many more mouths to feed; it's not like they have false flag choices like Republicrats or Demicans to distract and misdirect an angry populace.
Sawdust burgers from McDonald's & Taco Bell will keep Americans fat & happy...
I'll bet youre sorry you didnt embrace pink slime now...
They have been know to add rice-shaped plastic as an extender.
.
...which can later be scooped off the roadside, rinsed off, and reused.
China Home Prices Fall in More Than Half Cities Tracked
http://www.zerohedge.com/comment/reply/453284/2702027
Sorry for jumping in here near the top. My Thai wife talked to her Issan hometown brothers last night who are big time rice farmers and they are saying there's a big problem with not enough rain during Issan's rainy season and unless they get big time rain soon, many of the paddies will be lost. Not long ago the floods here took out most of the rice and this could be half as bad from what they're saying. I think the Thai government rice buying program built up reserves so don't go long on rice. But with the change in government, gasahol 91 and 95 has gone down and benzine 91 (unleaded 91 octane no alcohol) has gone way up. With probable corn shortages everywhere but in Brazil, this gasahol scam needs to stop. While I'm on my soapbox, food prices here are still going up and the Thai people aren't happy about it. The costs of producing and delivering it are going up, so the farmers have to charge more. To keep this post short, I tell my wife it's because of global money printing and stagflation that will eventually end up in hyper-stagflation. She says "alay na?" ("what"? in Thai). Oh gosh, thank buddah for Zerohedge where I can interact with the top 10% of the worlds best minds.
QE: Just say no.
Ben will be so sad if he can't rev up the presses
Good thing we have a drought going or they would have to blame it on stimulus/printing.
Beware of copper in your rice.
Mmmmm....copper and iron ore....together at last
Sending more soybeans to China this year, should I be asking for gold in exchange?
or silver.
Better, HK honies.
Just be sure to check those packages before you accept delivery. They might be trying to smuggle in some illegal meat.
The release may prompt Chinese importers to cancel shipments in the near term and take some pressure off international corn prices,
Preventing the free flow of food always takes the pressure off. [/sarc]
I still really think a high speed rail could fix this.
-JB
Blame it on Bo and his wife.
L0L!!! she has been eclipsed by the rooskies who have put pussy riot on trial!
and for my fave crime: hooliganism! :> for staging a performance in Moscow's Christ the Savior Cathedral in which they asked the Virgin Mary to rid Russia of President Vladimir Putin. <: {R/S]
Pussy Riot Trial Nears Verdict in Moscow | rollingStonehandcuff Nadezhda Tolokonnikov to slewie! you know how i love to suffer for the sake of the music of the spheres!
"We sang part of the refrain 'Holy shit,'" Tolokonnikova said in court today. "I am sorry if I offended anyone with this. It is an idiomatic expression, related to the previous verse - about the fusion of Moscow patriarchy and the government. 'Holy shit' is our evaluation of the situation in the country. This opinion is not blasphemy."
well good luck telling that to the patriarchs after praying to the virginM! what kinda lawyers do these poor girls have? clearly: they needed a better theological basis for their defense of hooliganism! i could handle their appeal. trust me!
free pussy riot!
A riot for free pussy!? didn't those Roman cats do that way back when?
The thread is about 'food'... So let me try to bridge the gap here...
EAT MORE PUSSY...
.
Send her to my house; I would find her hooligation pleasing.
i sense a wealth of fluidity in the depths of her love of free speech; she is such a natural zeroHead!
idiomatic expression to die for
putin must be going nuts! pwned, BiCheZ!
free pussy riot!
Let them bitchez eat gold.
Hey, no problem. The market will look through it and it will continue to go up...
When they got food inflation under control then they'll hopefully, finally, endlessly ease!!
It's so easy when you ease! (is somebody creative enough to make a song out of this?)
[/SARC]
Please nobody concern yourselves they have plenty to eat in DC now move along Hollywood Today is featuring a piece on Paris Hilton
I wonder when the Chinese will pile up their dollars in shipping containers and go around the world trading all their dollars for real goods, finally returning our inflation to us?
Long silver and canned ham, bitches.
The last thing you want is silver and canned ham.
At the end of the day (if society collapses/massive inflation), one guy, with one gun, and one bullet, gets all your silver and ham; for free.
I guess if you consider being shot full of holes and left on the front lawn for the Buzzards to eat "for free", then yeah.
So if you're expecting the end what's the better investment; silver or guns?
(was really my point)
Yes.
Forget about all the guns, bullets, Silver, ham, all that. Just accumulate plenty of good quality tail. Let them attract the resources. Enjoy the benefits lol
p.s. You don't need to concern yourself with defense. No man in his right mind would invade a den full of females...
Keep your pimp hand strong brother. Let me know how it works out. If pimpin was easy everybody be doin it.
Silver makes good bullets at short range, and are recoverable. Who sez that pallet of canned ham doesn't include a slug-thrower, or two?
Why does it have to be or? Ever hear of the Lone Ranger?
During WWII, communities helped out their own. People shared voluntarily. Should we come to that kind of scenario again, know that their will be people like me to stop people who think they can assert their will with a gun.
Multiple post.
Multiple post
They have already been doing just that, you just ahven't noticed because unlike our government they have a long term plan.
tmosley asked:
They've already started in Africa.
Not to mention the stockpiles of raw materials that keep getting mis-attributed to inefficient planning.
.
It's actually two prongs of a brilliant plan. They know that their dollars flooding into markets will stoke inflation, and they know that in an inflationary environment, he who spends first spends best. By spending first in Africa, their African partners get to spend it before the dollars lose too much value, thus building some amount of good will.
The stockpiling of raw materials is the second prong of the plan, and is exactly as you've described it. They can hold dollars and watch the purchasing power evaporate, or they can exchange it for raw materials, paying a little more in the short term but ending up ahead in the long term.
When the prices start to get a little too juiced, they cut back on the buying a little and start pushing stories of warehouses overflowing with copper and port facilities surrounded by mountains of iron ore.
"Oh, rook at our sroppy pranning. What we going to do with so much resources overfrowing everywhere? These inventories going to take years to work down."
Then, when the prices drop, ramp up the purchasing again.
I wonder if that is why they got a Primary Dealer status with the Fed....its not to buy...but to sell....
the bernank couldn't give a crap less about starving people. if the poor are hungry they can eat the peanuts out of jamie dimon's shit.
I really have to change my meal-planning timelines.
Don't think is a big deal for china, but it should be more serious to Japan, becauses they are the biggest import of US food. Considering their massive debt bubble and radioactive economy, they would be becoming a 3rd world country soon just like the drought hitting US. I pray for more drough to wipe off US food basket so that those food stamp slaves would starve to death
The food stamp people will do fine, they will still have government money to buy what they need. The working families without any money reserves are the ones that will get nailed when prices move up.
we'll just have to eat bucketfuls of more moral hazard. Tastes like chicken.
Exactly! Families like mine, who are just above the poverty line and who are still feeling the pain from the last time food prices jumped are going to get crushed. I try to buy a little extra each shopping trip but honestly I feel almost hopeless.... If it were just my kids and I, we could live pretty easily on what I have for 2-3 months...but what about my mom and dad...sisters, brothers, nieces, and nephews? I feel near panic just about daily. So fuck you and your wishes for people to die! FUCK YOU! FUCK YOU! FUCK YOU! THESE ARE REAL PEOPLE YOU ARE TALKING ABOUT! INNOCENT CHILDREN! ELDERLY! HARD WORKING HUMAN BEINGS!! Edited to add @ moskov...you better hope the gates on your little community are really high...or you have MASSIVE ammo stocks... because you are surrounded and greatly outnumbered.
And before anyone starts to judge....
1. We WERE firmly a middle class family until the last 5 years or so.
2. My parents ADOPTED all 4 of us.... stupid people reproduce more.... heroes clean up the mess.
/rant off
China's State Administration of Grain did not specify the volume of corn or rice to be released from reserves. <=Keynesian
The Grain Reserves Corp will be responsible for selling the crops, but no details were given on the timing. Some traders estimated the government might sell around 2 million tons to help stabilize prices ahead of the harvest, when supply is usually tight.
Beijing will probably need to replenish reserves towards the end of the year, and therefore the release will have only a limited impact on prices. <=The part Keynesian's don't understand.
Notice there is a world wide effort to release things of stored value to offset flooding the world with currency of no value?
I guess China is not omnipotent after all. (But has anyone in the Midwest heard of irragation?)
there they have a drought.
Mike, I understand your point, but you must understand that the heat is not controlled by irrigation. I have 50 acres in vegetables and have been irrigating like mad here in the Midwest, some crops will not set fruit in the heat we have had. So next time don't try to sound like you know wtf you are talking about.
Is it just me or does the Chinese gov't seem more concerned about food price inflation for their people than the U.S. gov't is about it here for us? They are releasing reserves while our gov't doesn't want to waive the ethanol mandate. Go figure.
Like people here are insinuating, they are pretending to combat food price inflation while actually exacerbating it. Depopulation is still on the agenda for one and all. I heard all the good meat was going to China (Communist party officials get the good stuff), which is why were are left with overpriced unmarbled crap back in the states. Poisoned meat (regular grocery store, Wal-Fart) is going for $6-12/pound while organic grass fed new york strip is going for $21.99/lb and organic grass fed ground beef $9.99 at Whore Foods. (Organic grass fed beef used to be considered "regular meat," now it is a luxury item.)
>>>>>>which is why were are left with overpriced unmarbled crap back in the states.
I get my grass fed beef straight from the farmer. It's ur corn fed shit that's marbled, full of cholesteral & all that gmo toxin crap. Why don't u cut corporate out of the loop & join a coop?
Exactly. Find a local guy who pastures and use a local slaughter house. Four families went in on the last head we bought. It was some very fine lean and mean beef.
Yeah, you'll need to buy a freezer...only downside.
Grass fed is a aquired taste after years on the cornfed gmo meat.
I traded for a half a cow, and while it was good, it was almost too lean. If I wanted lean dry meat I'd kill my limit in deer every year instead of letting them walk in search of ones with a rack. It is basically free, and I gave away a hundred or so pounds last year and still have some left, which I need to give away with the season starting soon
LOL...it sounds like you are cooking it wrong if it was dry. Grass-fed beef doesn't need nearly as much cooking time as corn fed beef.
Try going straight to the source. Next week I'm picking up about 45 lbs. of beef (includes steaks, roasts, hamburger, etc.) that was never fed corn or grain (grass only), and was never given hormones or antibiotics right at the farm it was raised on for about $6.75/lb. Well worth the price to me.
Thank God some folks you know wtf is going on. We make our living growing produce and selling local/grass fed/non-GMO/ beef chicken and pork into a large metro area. Yeah, it cost more. I appreciate that some folks get that. Join a CSA, get to know a farmer, you might need them.
Fuck ethanol
There, I said it-and I live in corn central. It's a fucking sham, I don't care how it "benefits" the local eCONomy. Stupid sheep in this area can't see the forest for the trees.
They created it as one of the ultimate military wonder weapons for controlling China.
All part of Washington's war on human beings.
a few questions.. what % of gasoline at the pump is corn ethanol? If they lower that % does it then jack the price of undiluted gasoline higher by the same degree? If it is bullish on REBOB do the momo hft's push prices even higher than otherwise ? or do the hft's only work for the benefit of the NYFED ?
Up to 10%, soon to be 15%. Whether it is corn or Soylent Liquid, I have no clue.
When the only redress to major public policy questions is to feign indifference to large scale fraud and corruption and to print more money, nothing is solved and the day of reconing becomes that much harder. Food shortages are a serious problem, made moreso by the missallocation of resorces via inflation. First, eliminate all the central bankers, then we shall see real prosperity again.
No ticky, no laundry bossman!
Looking up recipes for black swan; there will be quite a few landing on America soon. Have to feed my family.
No Black Swan. Doesn't fit the definition.
Everybody and their granny saw this coming as the drought continued...and the higher commodity prices associated with it.
If the term is being used like this, it doesn't mean anything anymore.
Try again Tylers.
Can't even call radioactively contaminated food a Black Swan as we can even see that coming too. Fukushima continues to spew radiation out of four damaged reactors, but few think about it much. Reports of contaminated food coming out of Japan weekly and contaminated food found grown (tested) in California.
If anyone is still eating food from California, you might re-think it. And go long vitamin C.
http://eon3emfblog.net/?p=3795
Not only will food inflation take the monetary policy out of the PBOC's hands, it may do the same thing for the Fed:
http://dareconomics.wordpress.com/2012/08/09/additional-fed-moves-will-p...
Like the Kaiser in 1913, China yearns for a place in the sun.......
gmo. grilled mutant organizim
This report was out Friday.
Non event.
http://www.reuters.com/article/2012/08/10/us-china-reserves-idUSBRE8790S720120810
I always think these selling of reserves are such bullshit not so much they have little impact, but that the state actually does it. Like the strategic oil reserve. No oil leave the reserves. They just buy less of it and call it a "release".
This may seem as a simplistic solutution, but if China takes the Yuan off the Us dollar peg four things happen: 1) China's food inflation is a thing of the past, 2) US dollar crashes (how much future consumer spending growth will be from the US anyways), 3) African and South American growth explodes, 4) China then has the inflationary room to ease.
Opinions?
As long as they have trading partners in place who will accept their yuan (which of course they aren't manipulating, wink wink) it would work.
The problem I see is that fiat, is fiat, is fiat. NO currency is backed by anything real and no-one trusts anyone else right now. Here, take my paper, no, you take my paper. Shit get real when contract orders for real goods are not delivered. Then the war hounds are unleashed. know your history.
Opinion:
1) China will still have to buy food from US or similar QE-addicted Western nations (all are addicted); 2) Yuan appreciates because of perceived higher-value, but only for moments since Yuan is limitedly convertible; perhaps QE-addicted Western nations demand real assets (Gold, perhaps?) instead of paper Yuan; 3) When major food exporters (US, South America, southern Europe, etc.) ALL have droughts / crop failures, prices of food items go parabolic everywhere, and 4) Distribution of scarce food leads to inequalities, so food riots, starvation, etc. become worldwide phenomena.
How's that for an opinion? BTW, I get no joy from any of this; friends of mine are just as likely to starve as my enemies (since very few seem to take this seriously). And since I have no way of knowing how long this cratering will take, do I risk starving my family to help anyone else out? We all starve together?By the way, the link to your 3) is tenuous, and will take time, probably longer than it takes to starve.
This is going to get really ugly, like watching RoboTrader do fellatio on AnAnonymous while MDB writes about it. I think I'll go watch the Brady Bunch re-runs instead (definition of desperation, for me at least).
No, the Asian's, Middle East are USD hungry to offset inflation that is eroding the values of their own currencies. The warning sign for China and the USD/CNY trade, was that last 6mths the corps of China have been buying USDs on mass, manly oil refineries, food companies etc. When the housing market blows up which is probably soon, the USD trade will go parabolic. The Chinese will not allow major USD weakness via the Fed and Goverment. It will being interesting to see what will take place, also war will cause the USD to be bid, but also oil/gold/silver.
Why did i just think about Wing sings AC/DC? That headline must be part of some nefarious Neuro-linguistic programming plot.
http://www.youtube.com/watch?v=kqa-HYihaZo&feature=related
LOST WAGES
Like people here are insinuating, they are pretending to combat food price inflation while actually exacerbating it. Depopulation is still on the agenda for one and all. I heard all the good meat was going to China (Communist party officials get the good stuff), which is why were are left with overpriced unmarbled crap back in the states. Poisoned meat (regular grocery store, Wal-Fart) is going for $6-12/pound while organic grass fed new york strip is going for $21.99/lb and organic grass fed ground beef $9.99 at Whore Foods. (Organic grass fed beef used to be considered "regular meat," now it is a luxury item.)
Only when compared to corn fed, feedlot fattened cattle is grass fed considered premium. It takes an animal twice the age to reach a slaughter level of finish and who really wants to eat old cow? A true premium cut of Canadian AAA is finished on a barley diet, which yields a bright white fat as opposed to the yellow fat of corn. Just the input of a 20 year beef produrer and organic farmer.
Hedonistic Adjust Bitchez!
What Me Worry?
The new iphone 5 is coming out!
Problem solved!
And for you Veterans out there. Don't forget NBC's newest reality show, Stars earning Stripes! Real second rate actors pretending to be in the military.
See? Who needs food?
Food inflation isn't China's only problem
China Is Running Out Of Money
btw we have FOOD INFLATION right here in the U.S.
Higher grocery bills knock American families lower
Chinese Proverb # 18:
The poor can only guess at what wealth is; the rich don't know what poverty means.
Here's a plan. Lets convert all our grains to fuels. American's are too fat anyway.
Stacking cans of corn lol.im fuckin nuts.Coo Coo for coco puffs.Only aisle in market and can corn down to the bottom.
I don't worry about China. Let them eat roots and grubs.
Let me guess: After you eat the deep-fried Black Swan, does it continue to Rove you Rong Time?tm
Corn going from 2.50 to 8 bucks is not good but it is America's right to decide whether to continue with ethonal or not. Let the world eat cake I guess.
I ate a $2.01 McDouble Cheeseburger the other day and I'm still here. They also gave me a free coffee. If I ate there every day i'd save a fortune.
Excellent!!!
Enjoy them while you can...in NYC they'll be banned along with Chick-Fillet in a few years...very "liberal" up there aren't they?...lol.
Ethanol mandates force blenders to be willing to bid any amount for the ethanol that gasoline sales require. This means that ethanol producers will eventually bid any amount for the necesssary corn to make that ethanol. This not only puts ethanol demand at the head of the line for corn, the only corn that will be left for animal feed will be the corn that is not needed for ethanol production, and the world price of corn is therefore tied to the world price for oil.
This debacle is totally owned by environmentalits and farm state politicians who only saw good things coming from ethanol. It is yet one mroe example of crony NGOs, crony academics and crony government. Lest we forget anyone, Archer Daniels Midland is the chief crony capitalist in this debacle that may be responsible for third world political instability due to its effect on food prices.
One root of this is also the specious idea that in a world swimming in hydrocarbons, for some reason we must have a "sustainable" supply of fuel, no matter how much extra it costs in dollars and lives.
It is time to limit or end ethanol mandates if only because of their effect on the price of food.
Think there is a bit of this model in there somewhere myself.
Set the scenario, a global economy where earning a profit anywhere is next to impossible if consumers do not have excess money.
Hypothetically how would you turn a profit in these circumstances if you had the money to do so?
Try this, buy a supermarket, fill it with food then double the prices on everything. Whose going to stop you, safe and secure in the knowledge your total profit on investment will be realised. That is the difference between needed and not needed items. For the the first time during this recesson you will be able to spot a profitable trade based on wether it is a need item like food or energy.
The economy is thus split between needed and not needed items and retaining profitability means putting the price up on needs.
They would eat fellow Chinese, their food inflation problems would be over. Want some soy sauce with that?