Why Not? Let's have commodities screaming through the roof, and in this case, wheat in particular, but why not? let's add some decent geopolitical instability to the mix, shake it up and watch what happens. IF markets reaction to such events is akin to what they have done in the past, then tightening of credit, decreases in risk tolerance, and a note of caution to productivity in relation to supply/demand actions may be expected - however, exactly how far along that continuum are we at this point? We received due confirmation of the Fed's intent to keep the taps wide open on the previously announced $600B intravenous supplement. The challenge has become that the money supply is leaking into emerging markets, and causing serious inflation concerns, particularly on food and energy. And as many have written on the subject, civil unrest and anti-government protests are what naturally follow. Greece. Italy. And others. Now Tunisia and Egypt. What did markets do today? The Dow breached 12000, though it did close slightly lower. Risk is full on again - in the face of uncertainty.
And it seems that the AG sector is continuing with strong and sustained interest and participation. DBA, an agricultural ETF, has surged from $22.85 >>> $33.98 (almost 50%) in the June 2010 to current date period. Potash as well. There are three new mines coming on stream (with many more in the planning phases) in Saskatchewan when there hasn't been a new one in over a decade.
Wheat Futures At 29 Month High As Developing Country Demand Surges In Aftermath Of Tunisia Revolution (Zero Hedge)
Dow Jones reports that wheat futures just hit a 29-month highs on "strong global demand." Per the newswire, Algeria bought 800,000 tons of milling wheat, with traders estimating the nation's purchases for January at about 1.8M. Turkey and Jordan bought wheat last week after rising food prices helped fuel unrest in Tunisia. "They're saying, 'Boy we've got to eat. We don't know where wheat is going to be in a month,' says PFG Best. CBOT March wheat ends up 18 1/4c at $8.56 1/2 a bushel, while KCBT March climbs 22 1/2c to $9.40 and MGE March jumps 21c to $9.77. The chart below shows the UBS Bloomberg constant maturity Wheat index which confirms the vicious loop of what surging prices and geopolitical instability means to wheat prices. The higher the prices, the greater the scramble by developing (and soon developed) countries to acquire as much wheat as possible and hoard it, hoping to avoid Tunisia's fate, which of course will lead to even greater price surges. And all of this ignores the impact of the Goblin in Chief, whose money printing fetish has earned him, in our books, the adjective 'genocidal'. Once China figures out what is going on, and rice prices finally explode as we fully expect they will, the world will figure out just why...The only silver lining - soon farming will be the most profitable profession in the world. And as bankers only go where the money is, Bernanke's strategy may in fact lead to the first net natural outflow of bankers from Wall Street in history.
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