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Deep Fried Black Swan Lands As China Admits It Has A Food Inflation Problem, Releases Corn, Rice From Reserves

Tyler Durden's picture


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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Mon, 08/13/2012 - 17:13 | 2702024 Robot Traders Mom
Robot Traders Mom's picture

The G-20 is getting ready to have an emergency circle jerk.





Mon, 08/13/2012 - 17:21 | 2702059 I think I need ...
I think I need to buy a gun's picture

black swans grey swans and white swans i'm waiting on the golden goose

Mon, 08/13/2012 - 17:29 | 2702081 camaro68ss
camaro68ss's picture

Just have the bernake print some corn and soy. duhhh

Mon, 08/13/2012 - 17:31 | 2702088 john39
john39's picture

soylent green...

Mon, 08/13/2012 - 17:36 | 2702103 Ahmeexnal
Ahmeexnal's picture

Deep FLIED Black Swan....they always serve that at the chinky buffet.  But somehow I always think those "Black Swans" look more like....rats.

Mon, 08/13/2012 - 17:57 | 2702143 FEDbuster
FEDbuster's picture

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.

Mon, 08/13/2012 - 18:02 | 2702157 SWRichmond
SWRichmond's picture

MOO / DBA, still in my portfolio.

You guys didn't get suckered into selling off your Ag stuff, did you?

Mon, 08/13/2012 - 19:39 | 2702420 economics9698
economics9698's picture

9% growth rate minus 9% inflation rate, uh we are fucked.

Mon, 08/13/2012 - 18:10 | 2702181 AldousHuxley
AldousHuxley's picture

it is chicken drenched in fake soy sauce (caramel coloring + salt).


go to panda express.



Mon, 08/13/2012 - 19:16 | 2702354 Atlas Shrugged
Atlas Shrugged's picture

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.

Mon, 08/13/2012 - 20:30 | 2702544 AldousHuxley
AldousHuxley's picture

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.





Mon, 08/13/2012 - 22:10 | 2702824 fourchan
fourchan's picture

bernake cares not about food or energy skyrocketing.

Mon, 08/13/2012 - 23:39 | 2702967 Atlas Shrugged
Atlas Shrugged's picture

How I long for dog...

Mon, 08/13/2012 - 23:54 | 2702983 Element
Element's picture

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)

Mon, 08/13/2012 - 22:16 | 2702835 oldman
oldman's picture


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

Mon, 08/13/2012 - 17:45 | 2702119 sitenine
sitenine's picture

You can't eat QE.

Mon, 08/13/2012 - 17:50 | 2702127 onelight
onelight's picture

hey wasn't GMO Corn going to feed everybody?

Mon, 08/13/2012 - 18:10 | 2702184 NidStyles
NidStyles's picture

It was those evil speculators driving up the price again. 

Mon, 08/13/2012 - 19:59 | 2702462 TheFourthStooge-ing
TheFourthStooge-ing's picture


hey wasn't GMO Corn going to feed everybody?

At least it's feeding a new generation of mutated RoundupReady© insects.

Mon, 08/13/2012 - 21:03 | 2702624 A Nanny Moose
A Nanny Moose's picture

Would ya settle for some Grey Goose?

Mon, 08/13/2012 - 19:10 | 2702343 CheapBastard
CheapBastard's picture

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:

Mon, 08/13/2012 - 17:39 | 2702107 spastic_colon
spastic_colon's picture

Ben - "hello China, can you make some room for our next QE?"

China - "OK"

Mon, 08/13/2012 - 17:40 | 2702113 saturn
saturn's picture

Do not forget to send emergency supply of shark fins and bear's bile, while at it.

Mon, 08/13/2012 - 17:16 | 2702027 ebworthen
ebworthen's picture

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.

Mon, 08/13/2012 - 17:33 | 2702095 francis_sawyer
francis_sawyer's picture

Sawdust burgers from McDonald's & Taco Bell will keep Americans fat & happy...

Mon, 08/13/2012 - 19:06 | 2702336 Pubcoceo
Pubcoceo's picture

I'll bet youre sorry you didnt embrace pink slime now...

Mon, 08/13/2012 - 17:45 | 2702120 Things that go bump
Things that go bump's picture

They have been know to add rice-shaped plastic as an extender. 

Mon, 08/13/2012 - 20:02 | 2702467 TheFourthStooge-ing
TheFourthStooge-ing's picture


They have been know to add rice-shaped plastic as an extender.

...which can later be scooped off the roadside, rinsed off, and reused.

Mon, 08/13/2012 - 18:12 | 2702188 Unbezahlbar
Unbezahlbar's picture

China Home Prices Fall in More Than Half Cities Tracked

Mon, 08/13/2012 - 22:30 | 2702872 Chicken_Little
Chicken_Little's picture

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.

Mon, 08/13/2012 - 17:13 | 2702028 malikai
malikai's picture

QE: Just say no.

Mon, 08/13/2012 - 17:32 | 2702092 DeadFred
DeadFred's picture

Ben will be so sad if he can't rev up the presses

Mon, 08/13/2012 - 17:16 | 2702034 Hype Alert
Hype Alert's picture

Good thing we have a drought going or they would have to blame it on stimulus/printing.

Mon, 08/13/2012 - 17:18 | 2702048 roadsnbridges
roadsnbridges's picture

Beware of copper in your rice.

Mon, 08/13/2012 - 18:10 | 2702183 Barometer
Barometer's picture

Mmmmm....copper and iron ore....together at last

Mon, 08/13/2012 - 17:18 | 2702049 LawsofPhysics
LawsofPhysics's picture

Sending more soybeans to China this year, should I be asking for gold in exchange?

Mon, 08/13/2012 - 17:45 | 2702118 roadsnbridges
roadsnbridges's picture

or silver.

Better, HK honies.

Mon, 08/13/2012 - 18:11 | 2702186 NidStyles
NidStyles's picture

Just be sure to check those packages before you accept delivery. They might be trying to smuggle in some illegal meat. 

Mon, 08/13/2012 - 17:18 | 2702050 Hype Alert
Hype Alert's picture

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]

Mon, 08/13/2012 - 17:19 | 2702051 bob_dabolina
bob_dabolina's picture

I still really think a high speed rail could fix this.


Mon, 08/13/2012 - 17:19 | 2702055 reader2010
reader2010's picture

Blame it on Bo and his wife.

Mon, 08/13/2012 - 18:47 | 2702278 slewie the pi-rat
slewie the pi-rat's picture

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 | rollingStone

handcuff 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!

Mon, 08/13/2012 - 19:22 | 2702363 redguard
redguard's picture

A riot for free pussy!? didn't those Roman cats do that way back when?

Mon, 08/13/2012 - 19:46 | 2702432 francis_sawyer
francis_sawyer's picture

The thread is about 'food'... So let me try to bridge the gap here...


Mon, 08/13/2012 - 20:09 | 2702486 TheFourthStooge-ing
TheFourthStooge-ing's picture


handcuff Nadezhda Tolokonnikov to slewie!  you know how i love to suffer for the sake of the music of the spheres!

Send her to my house; I would find her hooligation pleasing.

Mon, 08/13/2012 - 20:44 | 2702587 slewie the pi-rat
slewie the pi-rat's picture

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!

Mon, 08/13/2012 - 17:20 | 2702057 Alpo for Granny
Alpo for Granny's picture

Let them bitchez eat gold.

Mon, 08/13/2012 - 17:22 | 2702061 GERxit
GERxit's picture

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?)


Mon, 08/13/2012 - 18:27 | 2702222 larz
larz's picture

Please nobody concern yourselves they have plenty to eat in DC now move along Hollywood Today is featuring a piece on Paris Hilton

Mon, 08/13/2012 - 17:23 | 2702065 tmosley
tmosley's picture

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.

Mon, 08/13/2012 - 17:31 | 2702090 bob_dabolina
bob_dabolina's picture

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.

Mon, 08/13/2012 - 17:33 | 2702097 A Lunatic
A Lunatic's picture

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.

Mon, 08/13/2012 - 17:42 | 2702114 bob_dabolina
bob_dabolina's picture

So if you're expecting the end what's the better investment; silver or guns?

(was really my point)

Mon, 08/13/2012 - 17:47 | 2702123 IndicaTive
IndicaTive's picture


Mon, 08/13/2012 - 17:56 | 2702140 Benisprintingqu...
Benisprintingquintillionsbehindourbacks's picture

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...

Mon, 08/13/2012 - 20:10 | 2702488 NuckingFuts
NuckingFuts's picture

Keep your pimp hand strong brother. Let me know how it works out. If pimpin was easy everybody be doin it.

Mon, 08/13/2012 - 17:49 | 2702126 roadsnbridges
roadsnbridges's picture

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?

Mon, 08/13/2012 - 17:52 | 2702134 XitSam
XitSam's picture

Why does it have to be or?  Ever hear of the Lone Ranger?

Mon, 08/13/2012 - 22:31 | 2702874 Honey Badger
Honey Badger's picture

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.

Mon, 08/13/2012 - 22:33 | 2702876 Honey Badger
Honey Badger's picture

Multiple post.

Mon, 08/13/2012 - 22:33 | 2702877 Honey Badger
Honey Badger's picture

Multiple post

Mon, 08/13/2012 - 17:40 | 2702110 ReallySparky
ReallySparky's picture

They have already been doing just that, you just ahven't noticed because unlike our government they have a long term plan.

Mon, 08/13/2012 - 17:58 | 2702149 TheFourthStooge-ing
TheFourthStooge-ing's picture

tmosley asked:

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?

They've already started in Africa.

Mon, 08/13/2012 - 19:06 | 2702333 DeadFred
DeadFred's picture

Not to mention the stockpiles of raw materials that keep getting mis-attributed to inefficient planning.

Mon, 08/13/2012 - 20:56 | 2702609 TheFourthStooge-ing
TheFourthStooge-ing's picture


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.

Mon, 08/13/2012 - 19:48 | 2702437 youngman
youngman's picture

I wonder if that is why they got a Primary Dealer status with the Fed....its not to buy...but to sell....

Mon, 08/13/2012 - 17:27 | 2702071 buzzsaw99
buzzsaw99's picture

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.

Mon, 08/13/2012 - 17:48 | 2702124 IndicaTive
IndicaTive's picture

I really have to change my meal-planning timelines.

Mon, 08/13/2012 - 17:27 | 2702072 moskov
moskov's picture

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

Mon, 08/13/2012 - 17:33 | 2702100 Lednbrass
Lednbrass's picture

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.

Mon, 08/13/2012 - 17:44 | 2702117 Rainman
Rainman's picture

we'll just have to eat bucketfuls of more moral hazard. Tastes like chicken.

Tue, 08/14/2012 - 00:01 | 2702936 rambo1028
rambo1028's picture

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 @ 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

Mon, 08/13/2012 - 17:28 | 2702074 Hype Alert
Hype Alert's picture

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?


Mon, 08/13/2012 - 17:41 | 2702077 Mike Cowan
Mike Cowan's picture

I guess China is not omnipotent after all. (But has anyone in the Midwest heard of irragation?)

Mon, 08/13/2012 - 19:13 | 2702350 Zwelgje
Zwelgje's picture

there they have a drought.

Mon, 08/13/2012 - 20:18 | 2702506 NuckingFuts
NuckingFuts's picture

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.

Mon, 08/13/2012 - 17:29 | 2702083 El
El's picture

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.

Mon, 08/13/2012 - 17:38 | 2702094 Lost Wages
Lost Wages's picture

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.)

Mon, 08/13/2012 - 18:01 | 2702156 WillyGroper
WillyGroper's picture

>>>>>>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?

Mon, 08/13/2012 - 18:15 | 2702190 flattrader
flattrader's picture

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.

Mon, 08/13/2012 - 22:53 | 2702907 pursueliberty
pursueliberty's picture

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

Tue, 08/14/2012 - 01:32 | 2703079 El
El's picture 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.

Mon, 08/13/2012 - 18:02 | 2702160 El
El's picture

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.

Mon, 08/13/2012 - 20:24 | 2702520 NuckingFuts
NuckingFuts's picture

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.

Mon, 08/13/2012 - 17:33 | 2702099 quasimodo
quasimodo's picture

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.

Mon, 08/13/2012 - 18:20 | 2702199 reader2010
reader2010's picture

They created it as one of the ultimate military wonder weapons for controlling China.

Mon, 08/13/2012 - 17:38 | 2702105 Mike Cowan
Mike Cowan's picture

All part of Washington's war on human beings.

Mon, 08/13/2012 - 17:43 | 2702115 scatterbrains
scatterbrains's picture

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 ?


Mon, 08/13/2012 - 17:52 | 2702135 roadsnbridges
roadsnbridges's picture

Up to 10%, soon to be 15%.  Whether it is corn or Soylent Liquid, I have no clue.

Mon, 08/13/2012 - 17:30 | 2702087 Cursive
Cursive's picture

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.

Mon, 08/13/2012 - 17:31 | 2702089 quasimodo
quasimodo's picture

No ticky, no laundry bossman!


Mon, 08/13/2012 - 17:37 | 2702104 apberusdisvet
apberusdisvet's picture

Looking up recipes for black swan; there will be quite a few landing on America soon.  Have to feed my family.

Mon, 08/13/2012 - 18:18 | 2702182 flattrader
flattrader's picture

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.

Tue, 08/14/2012 - 04:20 | 2703140 Clashfan
Clashfan's picture

If anyone is still eating food from California, you might re-think it. And go long vitamin C.


Mon, 08/13/2012 - 17:40 | 2702112 Dareconomics
Dareconomics's picture

Not only will food inflation take the monetary policy out of the PBOC's hands, it may do the same thing for the Fed:

Mon, 08/13/2012 - 17:52 | 2702133 BandGap
BandGap's picture

Like the Kaiser in 1913, China yearns for a place in the sun.......

Mon, 08/13/2012 - 18:08 | 2702174 stant
stant's picture

gmo. grilled mutant organizim

Mon, 08/13/2012 - 18:20 | 2702202 flatsics
Mon, 08/13/2012 - 18:36 | 2702241 Catullus
Catullus's picture

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".

Mon, 08/13/2012 - 18:39 | 2702247 Fort Mac Flatlander
Fort Mac Flatlander's picture

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.



Mon, 08/13/2012 - 19:00 | 2702319 LawsofPhysics
LawsofPhysics's picture

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.

Mon, 08/13/2012 - 19:02 | 2702325 Encroaching Darkness
Encroaching Darkness's picture


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).

Mon, 08/13/2012 - 19:12 | 2702345 chump666
chump666's picture

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.



Mon, 08/13/2012 - 18:56 | 2702304 LeisureSmith
LeisureSmith's picture

Why did i just think about Wing sings AC/DC? That headline must be part of some nefarious Neuro-linguistic programming plot.

Mon, 08/13/2012 - 18:58 | 2702311 Fort Mac Flatlander
Fort Mac Flatlander's picture


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.

Mon, 08/13/2012 - 19:09 | 2702342 strangeglove
strangeglove's picture

Hedonistic Adjust Bitchez!

Mon, 08/13/2012 - 19:41 | 2702422 TheFulishBastid
TheFulishBastid's picture

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?

Mon, 08/13/2012 - 19:48 | 2702438 LMAOLORI
LMAOLORI's picture



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

Mon, 08/13/2012 - 20:17 | 2702504 CheapBastard
CheapBastard's picture

Chinese Proverb # 18:

The poor can only guess at what wealth is;  the rich don't know what poverty means.

Mon, 08/13/2012 - 20:31 | 2702547 Papasmurf
Papasmurf's picture

Here's a  plan.  Lets convert all our grains to fuels.  American's are too fat anyway.

Mon, 08/13/2012 - 20:56 | 2702607 10mm
10mm's picture

Stacking cans of corn fuckin nuts.Coo Coo for coco puffs.Only aisle in market and can corn down to the bottom.

Mon, 08/13/2012 - 21:01 | 2702620 suckerfishzilla
suckerfishzilla's picture

I don't worry about China.  Let them eat roots and grubs. 

Mon, 08/13/2012 - 21:45 | 2702765 ZeroAvatar
ZeroAvatar's picture

Let me guess:   After you eat the deep-fried Black Swan, does it continue to Rove you Rong Time?tm

Mon, 08/13/2012 - 21:48 | 2702775 robertocarlos
robertocarlos's picture

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.

Mon, 08/13/2012 - 22:01 | 2702813 robertocarlos
robertocarlos's picture

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.

Mon, 08/13/2012 - 22:10 | 2702823 nmewn
nmewn's picture


Enjoy them while you NYC they'll be banned along with Chick-Fillet in a few years...very "liberal" up there aren't they?

Mon, 08/13/2012 - 23:20 | 2702946 proLiberty
proLiberty's picture

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.



Tue, 08/14/2012 - 00:23 | 2703017 GreatUncle
GreatUncle's picture

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.

Tue, 08/14/2012 - 02:14 | 2703095 Joe A
Joe A's picture

They would eat fellow Chinese, their food inflation problems would be over. Want some soy sauce with that?

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