Friday, February 18, 2011

Mutually Exclusive Events

A couple posts back I mentioned that the financial system was in much better shape than I thought possible... but just because I said I was impressed with Bernake and Paulson's outcome, does not mean that I think the coast is clear.

The new Congress is failing. And failing badly.  The savings they engineered from the budget this week is less than the government's weekly deficit spending.  We needed something drastic. We got something boring.

There is a big difference between keeping the banks, grocery stores, and gas stations open and putting the U.S. on fiscally sound footing.  I never said the later was happening... I said I was impressed that things were not much, much worse, and gave credit where credit is due. The Treasury and the Federal Reserve react to the policy coming out of our elected branches of government. Blaming the guys that run these departments for the sh#! their bosses do is unreasonable.  It is successive U.S. Congress' and Administrations that have failed us. It would be better if the Federal Reserve did not exist... but last time I checked it is the law of the land.

I see the connection between interest rates and budget deficits - our deficits are so high that a 1% increase in interest rates increases the budget deficit by $100 BILLION - every freaking year. I do not necessarily make the connection to what is going on in the Agricultural commodities, the grains, the softs, and the meats to monetary policy or even QE2.  I mean, perhaps it is.... but WTF is up with grain inventories? Either we can't count and the harvests were not what they were purported, or we consumed a great deal more than the population increase and ethanol production would seem to indicate... but something is f*%$ed up.  The the near/front month contracts for the grains market have gone ballistic - 2 to 3 months before we get the corn crop in the ground (wheat is planted in the fall)... so there is no way they have advanced knowledge of next year's crop... I suspect that someone (or one or more countries) is quite concerned about their domestic inventories and are distressed that if something goes wrong with this summer/fall harvest they will wind up like old Uncle Hosni.

The world needs perfect weather in the grain growing regions.

11 comments:

PioneerPreppy said...

Last Summer into Fall it was pretty obvious China had joined the prepper/survivalist ranks. I linked several articles over the course of a few months about some pretty blatant storage moves on their part not to mention China bought up huge hectares of farmland in Africa.

Anyway as I pointed out what looks like a mere 5% decrease in total corn production actually adds up to more than a 10% reduction when you take yield into account especially since almost 3% more land was planted. The producers used more resources to plant that non-yielding land. I didn't hear the driers running as much this Winter so I am betting natural gas usage for the harvest was down.

Across the board the only ag commodity that wasn't down in the US was peaches I believe. In the past when one crop failed another usually (sometimes) over produced. Not so for 2010.

Lastly estimates should already be in for planned acreage being planted in a specific crop. Maybe someone does kinda have a handle on what to expect this coming season. Just a guess on my part.

Greg T. Jeffers said...

PP:

We do a lot of guessing around here... but unless grains are in a "bubble" something is up.

That doesn't mean next years growing season i not perfect... which is one of the reasons I can't bring myself to chase grains here... sold a few puts, though (which means I am willing to stand and buy but only at a lower price, and get paid for waiting... not exactly confident position taking).

PioneerPreppy said...

Greg

Grain would be in a bubble wouldn't it? Whether we feel the reduced yields in the U.S. are marginal or huge is irrelevant since other areas of the world suffered reduced yields as well. Every country is going to have to dig into stocks (if they have any) and will need to replenish them. Even a bumper year will see a big increase in demand so little price reduction.

Or maybe I am missing your actual point. When you start talking futures and market speculation I need a straw to keep breathing as I am in so far over my head.

Greg T. Jeffers said...

I was saying that either grains are in a bubble and its all speculation OR we have a genuine supply problem.

We will know the truth of it all after this harvest... I have no opinion on that whatsoever.

westexas said...

It's worthwhile to take a couple of minutes and review the End of Suburbia trailer from 2004 and to reflect on how events have transpired since 2004:

http://www.youtube.com/watch?v=qHr8OzaloLM

Stephen B. said...

The whole End of Suburbia:

http://www.mefeedia.com/watch/30666044

I just revisited it.

Certainly the way EOS foreshadowed the end of the building boom....they hit that. It's also funny when that woman's voice, talking about the 2003 blackout, says she feels like she's living in a depression....how funny that must have sounded in 2003, ("Heh, heh, heh" says Steve, laughing through his teeth.)

Except for that, I'm not so sure EOS has really hit yet, but let's wait and see in another year or two when, not only can people keep expecting to build more houses, but they are having trouble eating too and food and economic storms have continued to rework the Middle East.

People such as my sister and her family, still doing well in the high tech industry, living in an affluent Boston suburb, and just having spent a considerable amount of money on a kitchen/dining room rebuild, remodel, still think this whole peak oil, depression/recession, food scarcity thing is a bunch of hooey over nothing even now.

The natural gas situation has yet to play out too. If I showed EOS to lots of folks, they'd laugh over the natural gas doomsday talk in it. But maybe only fools should be laughing at the situation.

Stephen B. said...

I mistyped and meant to say that people CAN'T expect to build more houses in the middle of my previous post.

Anonymous said...

There is a good argument to be made that the Black Death (1348-50) was a Malthusian limit. The problems starts to come to a head with the Great Famine of 1315–1322 then another famine 1330–1334 and another 1349–1351. Basically there was a population expansion during the Medieval Warm Period. However, there was a dip in temperature rather rudely inserted right in the middle of it, between 1310 and 1330 that caused crop failures and famine. At one point during the Great Famine even the King of England and his party of knights, advisors, etc. went hungry, however England generally fared better than the rest of Northern Europe and Northern Europe generally fared better than Southern Europe.

With the population of Europe weakened, and attempting to rebuild their seed stock, they were ripe for catastrophe when the plague struck and cut the population in half. However the rate varied from 20% to 80% for different locations. Generally the better fed or more isolated you were the better.

Best,
Dan

BTW: Pigs were the most reliable source of food since they eat anything and then you could eat the pig.

Hydra said...

World stock market gained 3.1 trillion in January after a 2.6 trillion gain in Dec. There I'd plenty of money to cover the debt, if we just earn some of it.

We can build stuff, like infrastructure, and give it to our grandchildren, along with some of the debt.

Or we can leave them a world with a huge deficit in the tools they need to thrive.

Hydra said...

I may switch to planting corn this year, for tithe first time. Or wheat.

Stephen B. said...

I'm sorry Hydra if I missed it, but out of curiosity, what do you usually plant, as opposed to corn, if I may?