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Agriculture Comes On Strong


In early July, we made the determination that Agriculture investments were due to rally big: drought in Canada, China and elsewhere, plus rising demand from the growing third world middle class, meant that the cloud Agriculture was under was due to end. Timing is everything as you can see from the chart of Monsanto above.

I thought maybe you’d like to check out a couple of articles recently that support our view that the Ag area is almost a no-lose proposition for the intermediate if not long term.

Here they are (followed by today’s video – I always thought the woman that Simon sings about was one of the most beautiful I’d ever seen, and viewing this video for the first time in several years, I can’t say that I’ve changed my mind much):

Food inflation dips to 9.6% on cheaper cereals & veggies

From the Economic Times – India’s version of the Wall Street Journal

NEW DELHI: Food price inflation dropped to single digit 9.67% for the first time this year, even as the government continues to face a concerted Opposition attack on rising food and fuel prices.

The data is, however, unlikely to alter RBI’s hawkish stance, which has firmly shifted its policy focus to containing double-digit inflation and cooling inflationary expectations.

The deadlock in Parliament over the rising prices of essential commodities continued with a determined Opposition stalling both Houses for the third working day of the monsoon session.

Led by cheaper cereals, rice and vegetables, the annual rate of inflation in the food price index fell to 9.67% in the week ended July 17, as compared to 12.47% in the previous week, official data released on Thursday showed.

The Reserve Bank of India in its policy review on Tuesday hiked key interest rates for the fourth time this year. Worried that the higher food prices have transferred into core inflation, it also upwardly revised its projection for headline inflation to 6% by March end.

Bond yields moved up on expectations of another rate hike by September. The yield on the 10-year bond ended at 7.78%, 3 basis points above Wednesday’s closing.

While the finance ministry welcomed the news and said headline inflation will now move ‘choppily downwards’, an RBI official reiterated the need for further rate hikes.

“Food inflation has moved pretty much on cues I had expected. But it should not be over interpreted. The RBI has taken very sophisticated steps. Given that the inflation is high, you gently push up the interest rates without putting brakes on the growth. Abrupt measures could have had impact on employment for which weekly data is not available,” finance ministry’s chief economic advisor Kaushik Basu said on Thursday.

“You are injecting liquidity at 5% and inflation is at 10%. They will never be able to control inflation, everything else remaining the same. Monetary tightening has to be more aggressive,” an RBI official said on conditions of anonymity.

Headline inflation touched 10.55% in June and the government is worried that it will be even higher in July when the full impact of the fuel price hike is absorbed in the economy. The fuel price index rose 14.29% in the period, as against a 14.27% in the previous week.

Most economists are also of the view that while food prices are cooling, core inflation is now a bigger problem.
“We must wait for more data before reaching any conclusion. But if this trend continues, inflation could come down much sooner than expected and touch 6.5% by March. But I expect the RBI to remain vigilant as it is worried by non food inflation,” said DK Joshi, principal economist at rating agency Crisil.

NR Bhanumurthy, an economist at NIPFP, who agreed and said, “Moderation in food prices is part of a continuing trend. But the RBI is more concerned by the food and fuel price inflation pushing up headline inflation. So I expect another round of rate hikes.”

U.S. Food Inflation Spiraling Out of Control

From PRnewswire

FORT LEE, N.J., April 22 /PRNewswire/ — The National Inflation Association today issued the following food inflation alert to its members:

The Bureau of Labor Statistics (BLS) today released their Producer Price Index (PPI) report for March 2010 and the latest numbers are shocking. Food prices for the month rose by 2.4%, its sixth consecutive monthly increase and the largest jump in over 26 years. NIA believes that a major breakout in food inflation could be imminent, similar to what is currently being experienced in India.

Some of the startling food price increases on a year-over-year basis include, fresh and dry vegetables up 56.1%, fresh fruits and melons up 28.8%, eggs for fresh use up 33.6%, pork up 19.1%, beef and veal up 10.7% and dairy products up 9.7%. On October 30th, 2009, NIA predicted that inflation would appear next in food and agriculture, but we never anticipated that it would spiral so far out of control this quickly.

The PPI foreshadows price increases that will later occur in the retail sector. With U-6 unemployment rising last month to 16.9%, many retailers are currently reluctant to pass along rising prices to consumers, but they will soon be forced to do so if they want to avoid reporting huge losses to shareholders.

Food stamp usage in the U.S. has now increased for 14 consecutive months. There are now 39.4 million Americans on food stamps, up 22.4% from one year ago. The U.S. government is now paying out more to Americans in benefits than it collects in taxes. As food inflation continues to surge, our country will soon have no choice but to cut back on food stamps and other entitlement programs.

Most financial experts in the mainstream media are proclaiming that the recession is over and inflation is not a problem in the U.S. Unfortunately, they fail to realize that rising food and gasoline prices accounted for 58% of February’s year-over-year 3.85% rise in retail sales. NIA believes price inflation is beginning to accelerate in many areas of the economy besides food and energy, and all increases in U.S. retail sales this year will be entirely due to inflation.

Saturday, August 14, 2010
The Future of Overall Food-Price Inflation is Inevitable

From Trends & Forecasts

The future of overall food-price inflation is inevitable, as Wal-Mart reportedly has already hiked prices amid a recent jump in wheat prices and the failure of the Russian harvest.

A JPMorgan survey of supermarket pricing in Virginia showed a 5.8 percent increase in average prices at Wal-Mart, The survey compared a 31 item like-kind basket at a Wal-Mart Supercenter, Kroger, Safeway, Harris Teeter, and Whole Foods, the Business Insider reported.

Global fundamentals are supportive of a long-term rise in the price of food,

The UN’s Food and Agriculture Organization forecasts that total world demand for agricultural products will jump 60 percent between now and 2030, rising much more rapidly than the population

Richer people eat more meat. This increases demand for grain feeds for livestock over and above that used for human consumption

Ironically, a wheat stockpile in India that could feed 210 million people for a year is starting to spoil because the government lacks enough warehouses to store it.

According to The Associated Press, 17.8 million metric tons of wheat are exposed to the elements — stored outdoors, under tarps in India’s pounding monsoon rains.