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Wednesday's downward catalyst? Improving rice planting conditions in Asia and the United States, along with falling wheat prices in the U.S. Rice is a staple for about 50% of the world's population. The U.S. Department of Agriculture announced Tuesday that 72% of the U.S. rice crop was in good or excellent condition, up from 65% a week earlier. Further, wheat also fell to as low as $7.40 per bushel, which is 45% lower than the February 2008 record of $13.50 per bushel.
Shortages not likely
Economist Glen Langan, whose specializations include agricultural economics, told BloggingStocks Wednesday the food supply data points do not negate the two macro trends driving grain commodities higher -- rising developing world food demand from expanding middle classes and institutional investors chasing outsized equity returns -- but they do suggest one battle is being won: the battle over shortages.
"Higher prices in Asia are doing what we would expect, bring more rice and grain commodities to market, and provided this continues, the frenzy we've seen with regard to rice, if not the long-term price growth, will have been eliminated," Langan said.
Further, Langan said an adequate to above-average wheat crop in the United States would also help lower rice and related grain prices, in much the same way oil and natural gas move in tandem. "In many instances, the major grains, like the major energy forms, are seen as near-parallel substitutes. One can be subbed for the other, if the price justifies it," he said.
Longer-term, new seeds, and more weather tolerant and disease resistant crops will also help to slow the growth in grain and food prices, but Langan cautioned that the U.S. and other industrialized nations face two to three years of double-digit food price increases before supply factors slow these increases.
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Reader Comments (Page 1 of 1)
5-28-2008 @ 4:37PM
jinky said...
The least popular and plunging price is on CONDOLEEZA RICE, a formerly HOT commodity, and IF JOHN McCAIN would choose her, once again hotter, though unlikely!
5-28-2008 @ 6:48PM
william lindblad said...
Shortages gone??? I would like to remind someone to check your history book. The U.S. did not have any in 1931, but we did from 32 to 36. Yes, here in the great agricultural nation. Anyone remember the "dust bowl??" Given we are talking about the entire world, this could change - abruptly.
Get optimistic - after the storehouses are full.