Recently, prices of corn raced to record highs, although downside volatility has dominated the past few days. Nevertheless corn still drifts at near record levels.
Chart from Ino.com
Bloomberg’s chart of the day posits that demand has been outpacing supply as the alleged main reason.
From Bloomberg,
Corn demand is accelerating beyond farmers’ ability to boost yields, depleting stocks and adding to price gains as consumption in China and ethanol factories grows.
The CHART OF THE DAY shows gains in farm productivity have trailed demand that expanded more than fourfold since 1961, according to U.S. Department of Agriculture data. Consumption accelerated in the past decade on Chinese demand for feed and corn starch and increased use in the U.S. for ethanol output.
Corn futures climbed 86 percent in the past 12 months, more than any other grain traded in Chicago, after dry weather limited the 2010 U.S. crop and as flooding in the past two months delayed planting, threatening prospects for this year. July delivery corn rose to a record $7.9975 last week.
“It’s a huge problem,” Abdolreza Abbassian, a senior economist at the United Nations’ Food and Agriculture Organization, said from Rome. “This is primarily U.S. ethanol and starch in China, and then you have the feed where you have stronger growth, again in China, but across the world.”
Consumption demand represents an oversimplistic tale.
There are many questions to ask
To what degree of consumption has been artificially boosted easy money globally?
How much of the imbalances or diversion of resources have been due to subsidies to ethanol?
To what degree has restrictive trade policies (locally or internationally) has contributed to hampering of the supply side?
To what degree of local based regulations has contributed to boosting the demand side?
Why has there been a generalized increase in food prices if consumption has only been the major factor involved?
There are many more.
It’s easy and popular to attribute consumption growth to China, but China has been in the process of inflating her ballooning bubble economy, which means whatever growth we see, a large segment of which must be artificial.
Only when China’s bubble implodes shall we see the true extent of the consumption ‘growth’ story.
Lastly high corn prices as stock markets undergo selling pressures seem much like symptoms of stagflation.
From Tradingeconomics.com
Even in the US, statistical inflation figures has been going higher.
Yet the mainstream keeps denying them. Data from recent news, as producers and consumer prices indices, reveals that prices have risen beyond the expectations of the ‘experts’. This even comes in the face of the questionable method of computing for inflation indices.
Incidentally, denial makes up the 2nd stage of the Kubler Ross grief cycle. This denial is especially strong for those blighted with ideological (political and economic) biases.
It will take more pain for these people to finally reach the state of acceptance or reality, especially for those who insist to live in a self-designed world.
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