(emphasis mine) [my comment]

Wet weather delays harvest for farmers from the Midwest to the Deep South
By BECKY BOHRER , Associated Press
Last update: November 5, 2009 - 3:03 AM

[Mississippi, Louisiana]

NEW ORLEANS - Hartwell Huddleston returned the extra combine he bought to help harvest what looked to be one of his best soybean crops ever.

After two months with little letup in rain, he figures he got five days' of work out of it, and one was spent just looking for dry ground to cut. And the quality of some of the crop he did bring in from his northwest Mississippi fields was so rough, an elevator refused truckloads.

"We've had a lot of rainy years, but this one puts those to shame," said Huddleston, who also sells crop insurance. "If a person's a farmer you start to think, 'Where am I going to sleep? How am I going to feed my children?'"

Late-season rains have delayed harvest from the Great Plains to the Deep South, frustrating farmers and raising questions about whether some in the hurricane-ravaged Gulf region would be able to stay in business after disastrous back-to-back years.

The longer the remaining U.S. cotton, corn and soybean crops stay out, the greater the potential for consumers to feel the effects and face slightly higher prices for products ranging from sodas to tofu to meat, said Chad Hart, an extension economist at Iowa State University.

One saving grace for Midwest grain farmers is their corn and soybeans were in relatively good shape heading into the recent rainy spell, and expectations remained high for a still-large production year. Farmers were taking advantage of this week's break in weather to try to make up for lost time.

For many in Louisiana and Mississippi, though, the waiting continued. In some cases, it was just too late.

Stephen Logan was weighing whether to tear up his water-logged fields to get at a cotton crop speckled in places with mold, mildew and stains. He said he got 28.1 inches of rain on his northwest Louisiana farm last month, more than he said he's seen in some entire years, and the shorter days have meant less sunlight to dry things out.

"This was shaping up to be one of the best cotton crops we ever had, but it's absolutely rotted away on the stalk," Logan said. "It's very frustrating and humbling, to say the least."

While the rains helped erase the remnant drought conditions that plagued much of the region earlier this year, their timing — at the peak of harvest in September and October — couldn't have been worse.

The wet weather is expected to cost farmers in the two states more than $120 million on their cotton, according to preliminary estimates by agricultural economists and Louisiana State and Mississippi State universities.

For all major row crops, Louisiana farmers stand to lose $275 million in revenue and Mississippi farmers, $371 million, according to the early estimates. This would further compound the losses many producers suffered last year due to hurricanes Gustav and Ike.

"This isn't a hurricane but in many cases, it's every bit as bad in terms of impact on quality and yields," said Kurt Guidry, who wrote the Louisiana State report. When you take the two years together, "most producers are going to have serious financial stress as they move from this year to next."

And most will need "significant" help, either from the government or another source, to get financing for 2010, he said.

Low-interest loans or other aid may be available to farmers in the handful of Louisiana parishes and Mississippi counties that have been declared federal disaster areas due to late spring and early summer flooding, but state officials are seeking additional help for those affected by the drought and subsequent rains.

"More than ever, Louisiana producers are in need of disaster funds," state Agriculture Commissioner Mike Strain said.

Back in Mississippi, farmer Andy Clark doesn't know what he'll do. He put everything this year into sweet potatoes — an expensive-to-produce crop that in a good year can yield strong returns.

This wasn't a good year. Delays in getting into the fields meant potatoes rotting in the wet soil, and even if one were lucky to harvest some, odds were good — given all the rain — they'd rot in the storage house. And it's hard to justify the labor costs for that, he said.

Of the 82 acres he'd planted in central Mississippi, he'd harvested about four. His side business, hauling potatoes, "is shot."

"It's really going to be hard to sit down and talk with the bank. There's probably not going to be any way to persuade them to give you any more money," he said. "At this point, you're probably going to have to ask them to give you a little more time to pay them back."

"If there's any way possible, I'll still farm," he said. "But you've got to look at everything, you know? I don't know what else I'd do."

Businessinsider reports that Floods In Missouri And Illinois.

Floods In Missouri And Illinois Leave Soy And Corn Crops Sitting Idle
John CarneyNov. 2, 2009, 3:20 PM

[Missouri, Illinois]



This is supposed to be harvest season for corn and soy beans in the midwest. You can't harvest flooded fields. Even after the flooding recedes, the crops generally need to dry before they can be harvested. Right now there's a lot of corn and beans sitting idle in the field.

You can pick up some of the latest chatter from farmers themselves over at the Farm Journal's message board.

One farmer from Will County, Illinois writes:

We are now very wet. Basically the last harvesting was done on Wednesday, Thursday and Friday (Oct. 21-23). We received 3.1" of rain. Soybean harvest in this area still stands at 30-40% complete. Since Oct 21, no soybeans have been harvested. As of today, received 3.5" rain this week, with .7" early in week, and last night and today an additional 2.8", so far. There has been a few operators taking a little corn out before this last big rain, moisture levels still reported to be in the 30 + % range, and field conditions are muddy. You can probably go ten miles in any direction of our farm and find less than 1 % of corn harvested. In our low spots today, we have corn standing in water, with water up to the ears, and in some places the ears are in the water. So far this month, we received 9.2", let’s hope Nov. will be dry.

Here's a AP's write up of the flooding:

By JIM SALTER, Associated Press Writer

ST. LOUIS (AP) — Midwestern flooding is usually associated with the spring or summer, so even officials at the National Weather Service are perplexed about the unusual fall flood that is causing rivers to spill over their banks in parts of Missouri and Illinois.

Heavy rain fell last week over much of the two states, causing flash flooding and rising rivers. In fact, October rainfall was at record amounts at many spots.

The autumn monsoons are hard to figure, said Benjamin Sittrell, a meteorologist for the National Weather Service office in suburban St. Louis.

"Typically during the late-year period, it's our driest portion of the year," Sittrell said. "To see such astronomically high amounts of precipitation, where we got several inches above the previous record levels, is very abnormal.

"I think there's a lot of uncertainty about how this wet October unfolded."

The flooding is generally pretty minimal compared to events such as the floods of last summer and those in the summers of 1993 and 1995, but some problems exist.

Sittrell said thousands of acres of farmland are under water, particularly in the flat areas of southern and western Illinois, where the Illinois, Ohio and Kaskaskia rivers are among several that are flooding.

The Vicksburg Post reports that Farmers look to D.C. for help.

Farmers look to D.C. for help
By Pamela Hitchins
Wednesday, November 4, 2009 1:14 PM CST

[Mississippi]



Mississippi farmers facing catastrophic crop losses after heavy fall rains hope to see extra disaster relief funded by Congress.

Dr. Lester Spell, Mississippi Commissioner of Agriculture and Commerce, said he has asked the Mississippi congressional delegation and the U.S. Department of Agriculture to go beyond normal programs to help farmers seeing double devastation in 2009 — flooding in the spring and the fall — after 2008, which was a tough year as well.

Losses are on the horizon in soybean, cotton, sweet potato, corn and rice crops. The state’s pecan crop looks better than average this year, though extended periods of rain are threatening to delay that harvest, too.

Economists at Mississippi State University estimate farm losses have reached $485 million. Nearly 64 percent of the state’s sweet potato crop — valued at nearly $40 million — is expected to be lost. Soybean losses could top 44 percent, or $307 million, along with half of the state’s nearly $150 million cotton crop.

“Existing USDA assistance for many of these crops will not be available for up to a year or more,” Spell said in a press release. “By that time, I fear many of our hardworking Mississippi farmers will no longer be able to operate due to the excessive losses faced this year which will, in turn, affect their access to financing for the future.”
…
“There’s a great need for additional relief for farmers,” Warren County farmer Ed McKnight said this morning from the field off Chickasaw Road where he was harvesting soybeans. “But they need it like AIG got it — in a matter of weeks.”

…
In addition to rainfall, Warren County farmers like McKnight with fields north of Vicksburg in the Chickasaw and Long Lake areas, also are facing an unusually high Mississippi River for this time of year, said Coccaro. Generally measured in single digits in November, the river was at 36.6 feet Tuesday and forecast to crest at 40 feet Nov. 13.

“That’s putting a lot of acres under water,” Coccaro said, “and makes other farm-land a lot harder to get to.”

“We’re trying to get them out before the river gets them again,” McKnight said of his soybeans. “The rainfall has delayed us from harvesting, but the quality is still good.”

Deltafarmpress reports about Arkansas harvest

Soybeans: half a crop if lucky
Nov 4, 2009 11:00 AM, By Mary Hightower, University of Arkansas

[Arkansas]

The rain-shocked 2009 growing season may prove to be devastating for Chicot County, Ark., where more than 65 percent of the county is farmland.


SUNKEN SOYBEANS — This Chicot County, Ark., soybean field seems equal parts water to soy. Farmers in the southeasternmost county of Arkansas may wait days or weeks to be able to get back into their fields. (University of Arkansas Division of Agriculture photo by Gus Wilson)

On Monday and Tuesday, Gus Wilson, Chicot County Extension staff chairman for the University of Arkansas Division of Agriculture, made the rounds, visiting farmers and getting a first-hand look at what record rain has left of crops in the state’s southeasternmost county.

He said on Tuesday that he believed Chicot and neighboring Ashley and Desha counties were the hardest hit by the 2009 rain.

“It’s bleak,” Wilson said. “It’s going to really hurt these poor Delta counties because here, agriculture is all that we’ve got.”

Earlier this season, the harvest outlook was promising.

“In September, I was pretty happy with what I was seeing in the fields,” he said. “Now we are going to be lucky to make half a crop compared to the last couple of years, all because of the weather.”

“Seven or eight weeks ago, we were looking at 1,100- to 1,200-pound cotton” lint yield per acre, Wilson said. “Now we’re 500 to 600 pounds.”

The soybeans are just as bad. Back in September, “we had a good soybean crop. The yield was there,” he said. “We have lost at least 60 percent to 80 percent due to the weather.”

“Our rice is going to be half,” Wilson said.

Wes Kirkpatrick, Desha County, Ark., staff chair for the U of A Division of Agriculture, said, “I have heard instances where producers had fields that traditionally yielded 1,200 to 1,400 pounds per acre are yielding 700 to 800 pounds per acre this year.”

Soybean quality is also an issue, and the quality issues vary widely from field to field, he said. “Some fields have no damage and other fields have nearly 100 percent damage.”
…
“Dryers in Chicot are rejecting beans because their quality had deteriorated so much,” Wilson said. Beans that are being taken are so deeply discounted that growers are lucky to get $3 a bushel.

Non-discounted prices on Tuesday were running between $9.89 a bushel at Des Arc, Augusta and Clarendon to a high of $10.31 at Memphis, Tenn., said Scott Stiles, Extension economist-risk management, for the U of A Division of Agriculture.

“This is the worst I’ve ever seen and I’ve been a county agent for eight years and around farming all my life,” Wilson said.

Last week, another county agent said that as a group, farmers tended to be optimistic people. “They have to be,” he said last week while 5 inches of rain fell in 24 hours in some parts of Arkansas.

Wilson agreed, but added Tuesday that “I have never seen such a discouraged bunch. It boils down to them saying, ‘I’m not going to be able to pay my bills.’”

Kirkpatrick heard the same in his county. “Most farmers are ready to get this one behind them so they can lick their wounds and pray for a better year next year,” he said.

Last month, Arkansas’ governor designated 23 counties disaster areas due to flooding and rainfall, including Ashley, Chicot and Desha.

Last Thursday, the governor’s office said it was working with USDA to obtain a declaration that would help farmers in Ashley, Bradley, Calhoun, Chicot, Conway, Cross, Desha, Faulkner, Independence, Jackson, Jefferson, Lafayette, Lincoln, Little River, Miller, Monroe, Perry, Phillips, Poinsett, Pope, Prairie, St. Francis, Union, White, Woodruff and Yell Counties. [Are there any counties that won’t be declared disaster area?]

Ashley County Ledger reports that 'It's bad'.

‘It’s bad,’ Agent Characterizes Crop Situation in Ashley County

[Arkansas]


A tractor leaves deep ruts in this UA Extension photo.

"It's bad," was the way Ashley County Cooperative Extension Agent-Agriculture Kevin Norton described the status of Ashley County's crops this past week.

At the point in the year when farmers should be right in the middle of the fall planting season for wheat and oats, they are still struggling to harvest some of this year's crops, particularly cotton.

The heavy and continuing rains in September and October not only hampered the harvest, but also led to extreme reductions in quality and yield. Norton said that some cotton fields which normally produce 1,200 to 1,500 pounds per acre are yielding only 500 to 800 pounds this year. "Five hundred to 800 pound cotton does not pay the bills," he said.

The county agent said that between the rains most farmers have been able to harvest most of the rice, most of the soybeans and almost all of the corn. He said that there is a little bit of corn still in the fields, "but it is not in good shape." Corn yields, Norton said, were down about 15 to 20 bushels per acre from last year. For the corn still left in the field, both the yields and quality will be greatly reduced. He said that most of the unharvested corn is laying on the ground which will mean that from 25 to 50 percent of the yield will be left in the fields.

Norton said that most of the rice crop was fair to OK, noting that one verification field cut 201 bushels per acre.

The same is not true for soybeans and cotton. Norton said that the soybeans which were ready to cut when the rains began "really took a beating" with both the yields and quality very low. He said that yields were down across the board, depending on the timing. The location also plays a role in yields. Norton said that normally in wet weather, soybeans on the prairie areas do better than those in the Delta.

He estimated that 80 percent of the soybeans have been harvested. For the remaining soybeans, some of which will have extremely low grades, he is concerned that granaries may not want to take them because of the quality.

With the continuing rains, "It is possible that there will be cotton out there at Christmas," Norton said, "but I am not sure how much will be left on the plant."

…
Overall, Norton said, he expects farmers to carry over a lot of debt this year. "I am afraid we will see a shakeup," he said. "It will be months before we see the full magnitude of how bad this fall has been."

Conditions Bad Statewide

Statewide, conditions were deteriorating rapidly as continued drenching rains wreaked havoc on the fall harvest. Yield potential and quality decreases the longer finished crops remain in the field.

"At this stage, yield and quality losses for Arkansas' major row crops could easily exceed $650 million," said Arkansas Farm Bureau President Randy Veach Thursday. "Presently, the bulk of the state's fall harvested crops are rated only fair in their quality. With additional delays, a growing percentage of the crop will move to a poor rating."

Veach says already 40 percent of the cotton and a third of the state's soybean crop have a poor rating. Seven consecutive weeks with at least one day of measurable rainfall, statewide, have prevented crops from drying out.

The cotton harvest is at only 15 percent complete, compared to nearly 75 percent by this time normally.

The soybean harvest is nearly 40 percent complete, compared to a normal harvest rate at this time of 60-70 percent.

Rice is 15 percent behind its normal harvest rate.

And the corn harvest is usually done by now, but 10 percent of the crop is still in the field.

The combination of heavy rains during this spring's planting season and now during harvest is really hurting farmers.

…
State Damage

Near constant rain has caused between 25 percent and 80 percent damage in some cotton, rice and soybean fields in Arkansas as growers struggle to harvest what's left during brief periods of dry weather, according to extension agents, agronomist and economists with the University of Arkansas Division of Agriculture.

In Phillips County, there was some good news for cotton farmers. "For sure, there is no total loss," Robert Goodson, Phillips County extension agent for the division of agriculture, said Thursday. "While we won't meet the crop average for Phillips County, it won't be as bad as everyone thought at first."

However, some soybeans in his county were fungus-fraught, rotting or splitting. "There are a lot of fields that have above 25 percent damage due to the wet weather," he said. "I have heard horror stories of damage in the 80 percent range."

Still, while the yield won't hit 2008's 50-bushel-an-acre mark, "this year, I think we'll be in the low 40-bushel range," Goodson said. "The saving grace for the soybean crop is the price. It is still strong. "Cash price at Marvell is $10.05, which makes lower yields look better," he said.

Scott Stiles, extension economist-risk management, said the moisture was chipping away at the strong prices. "Moisture discounts, foreign material, mold in the samples-- all these discounts add up to dollars," he said, adding that despite the strong prices, "the discounts are getting pretty deep on soybeans."

…
"The longer it rains, the uglier it gets," he said, adding there will be consequences for next year. "Seed quality for soybeans for planting next year's crop could get tight. There's simply no good seed."

Jackson County Extension Staff Chair Randy Chlapecka said river and stream flooding "has completely ruined some soybeans. "In regards to rice, we still have about 30 percent of our rice still in the field, which is unheard of for this time of the year," he said. "There is great concern about how much the late planting plus the wet, cool late summer and fall has impacted yields and milling of the remaining crop."

Chlapecka also said the effects of this year's rain would stretch into 2010. Jackson County had some of the state's heaviest rain this year: recording more than 19 inches from Aug. 1-Oct. 21.

"Very little wheat has been planted and we're rapidly approaching the end of the optimum planting window," he said. "We'll almost certainly end up with the smallest wheat acreage in forever.

Texarkana Gazette reports that damage to crops is 'tremendous' in Arkansas.

Agriculture: Damage to crops is ‘tremendous’
By: Jim Williamson - Texarkana Gazette -
Published: 11/05/2009

[Arkansas]

Dollar amounts have yet to be placed on crop damages in Lafayette and Miller counties, but estimates by the University of Arkansas Extension Service indicate the losses will be tremendous, especially for soybeans.

The grain elevator companies are turning down soybeans because the damage is “too severe,” said Joe Vestal, Lafayette County Extension agent, staff chair. “We can’t put a dollar amount on the damage yet, but we’ve had lots of damage. It will be tremendous for soybeans. Most of the soybeans ready to be cut, before the rain started in September, will probably be a total loss." About 70 percent of the loads to grain elevators are damaged.

Agfax reports that 24/7 Harvest in Arkansas.

Arkansas: Harvest is a 24/7 Affair
AgFax.Com - Your Online Ag News Source
By Mary Hightower

[Arkansas]

HARRISBURG (November 4) – After a month of watching promising crops succumb to fungus and other ills caused by record rainfall, Arkansas farmers were running combines and pickers full tilt this week to reap what’s left in the fields before the next rain falls.

“As long as the weather holds, guys will be going 24/7,” Jeremy Ross, extension soybean agronomist for the University of Arkansas Division of Agriculture, said Wednesday. “They were harvesting around my house last night ‘til around 9 p.m.”.

…
For all their effort, some growers may see precious little. Cotton growers have seen hard-locked bolls, sprouts in the bolls, boll rot, discoloration and other conditions that, in some cases, have nearly halved their yields to 700 or 800 pounds of lint per acre..

Soybean growers who had great stands in September, are now harvesting beans damaged by fungus, germination, split pods and other problems that will cut deeply into the per-bushel price. In southeastern Arkansas, some growers were lucky to get $3 a bushel when non-discounted prices were running around $10..

…
Beyond the harvest, there is anxiety about the future for some farmers.

“Some growers expect to go out of business in this region, based on the heavy damage to their soybean and cotton crops,” Ross said..

THV reports that underwater soybeans in Arkansas.

White, Ouachita Rivers Still Rising From Heavy Rain
Ashley Blackstone Mike Duncan 11/4/2009

[Arkansas]
…
And further downstream in near Des Arc, the crest is not expected until Saturday or Sunday. Farmers there are paying the big price. Five-hundred acres of Doyle Burnett's soybeans are already underwater.

THV's Mike Duncan asked Burnett, "What are you going to do with that? Just let it go I guess", Burnett replied. "It will be gone. I don't see any chance of the river coming back down anytime soon. So I think they're totally gone."

The Forest City Summit reports that rain causing a crisis for area farmers.

Rain causing a crisis for area farmers
By Chris Todd, For the News-Tribune
Nov 03, 2009 - 17:07:38 CST.

[Iowa]

Farmer's Coop Association General Manager Randy Broesder has been involved in farming for a long time, but he can't remember a harvest season that's been as scary as this one.

An inch to two inches of rain fell on the Britt and north Iowa area early Thursday morning and most of the day, making a tough situation in the already saturated fields even tougher.

“Some of the guys have told me that harvest hasn't been this late since 1962, and that's a long time ago,” Broesder said.

Darwin Luedtke, a grain merchandiser for the North Central Cooperative office in Woden, said this harvest has been a major battle for farmers.

“I haven't seen anything like this in 37 years,” Luedtke said. “The fields are wet, beans and corn aren't as mature as they should be because of the cooler weather this summer, and it's going to cost farmers money to dry the crop. It's been a very difficult harvest.”
…
“But the weather is critical at this point. We'll need about six more weeks of dry weather to get this harvest done.”

At the Coop, farmers will be bringing in a lot of wet corn and it may be harvested faster than it can be dried by the elevator.

“There's going to be some lines, and guys are just going to have to be patient,” Broesder said.

The Gothenburg Times reports that farmers challenged by shrinking corn.

Farmers challenged by shrinking corn
Written by Elizabeth Barrett Thursday, 05 November 2009 16:22

[Nebraska]


SNOW SHROUDS: Corn throughout the area received a heavy blanket of the white stuff Friday morning—up to 18 inches south of Brady. Snow fell three times in October. That coupled with plentiful rain has delayed harvest as much as three weeks.

Agriculture.com reports about The Harvest From Hades.

The harvest from hades
By Ray Grabanski
Market Analyst
11/04/2009, 10:18 AM CST

This year's harvest has been an extremely trying time for corn and soybean producers who have struggled through perhaps the worst October ever for harvesting grain. As we enter November, only 25% of the corn and 51% of the soybeans are harvested - woefully behind the normal pace of 71% corn and 87% soybeans. This could be a disaster in waiting, and the market is starting to treat this serious threat to the 2009 crop with more and more price premium as time clicks on. The one thing that can seal the nail in this coffin is an early arrival of winter, effectively socking in a good share of the 2009 crop in the fields.

Soybeans could be more devastating than corn in this regard, as snow would shatter soybeans certainly more easily than causing losses in corn. But even corn could be affected, as corn needs time to dry down and also to get picked and dried in grain dryers. We already are getting well behind normal so that drying needs to occur at cooler temps in November instead of October - slowing the whole process down. The seriousness is even more evident when you consider that problem areas will take a while to dry down soils before being able to tackle the harvest. The time needed to do that will be frustratingly long, as the whole process of drying out soils takes longer in November under cooler conditions and shorter days than in September or October.

So, the whole process of dealing with this harvest has been more than trying. For some areas, it actually gets even worse. In many ND, MN, and other fields down into Ill, corn is molding in the cob. The mold can be a potential problem down the road, as buyers are being very particular about not accepting this questionable quality grain at harvest. Buyers simply don't have time to blend this 'off' grade grain off at this time, and therefore some farmers are finding they don't have a market for this grain at harvest.

Pro Ag has researched the mold problem and found that crop insurance considers it kernel damage, and is not treated like mycotoxins. Instead, the kernel damage is considered a loss but it takes over 35% of kernel damage (corn and soybeans) to qualify for a price comparison method of adjustment (Reduction in Value or RIV treatment), where the big insurance checks can come. Otherwise kernel damage for both corn and soybeans up to 35% is basically a one-for-one deal (slightly more in corn but less in soybeans) - based on a table in RMA special provisions. For example, 22.5% molded corn is adjusted at 22.5% less than total production (our 200 bu example would be 200 x .775 = 155 bu corn). The elevator may say the corn is worthless today, but crop insurance says its worth the same as 155 bu corn. Therein lies the rub. Of course, after harvest this corn might be worth a whole lot more as competition to blend the corn for cattle feed might make it more marketable.

For farmers with less than 35% mold (which includes most corn with mold problems), there is an unpleasant surprise! Many elevators say over 10% mold is unmarketable, so farmers are finding that crop insurance will give only a 5.9% adjustment for 10.5% mold. If you have a 200 bu crop, 94.1% of it still counts as production so essentially this is no loss for most producers. Quite a catch to find a large crop that is unmarketable, and then find no loss for crop insurance. The table ratchets up to 41.1% adjustment at 34-35% mold, and over 35% goes to a price comparison method, or RIV.

Below are the comments made during the last few days from Agweb's November Crop Comments in which some farmers express skepticism about the USDA’s bumper harvest.

November Crop Comments
11/5/2009

Here's a sampling of what some folks are saying:

…
11/4 - Franklin Country, North-Central Iowa: Corn at 28%, we have maybe 10% harvested in this area. The last load of beans I took in was 14.2%, we have around 33% harvested around here. Yields for beans going low-50's to low-60's. Corn yields- only God knows. I would say we will be down around 25 bu from 2004 record yields; probably 190-195 will catch it this year. Certainly no record yield in my part of Iowa as the USDA is saying. Quality will be a big issue this year; I see a lot of corn getting dumped, rather than stored. The old-timers are saying they have not seen a harvest like this for many years and I hope we never see another one like this one for 30 years.
…
11/3 - St. Clair County, Southwestern Illinois: We picked up a mere 14 inches of rain in October. Not only was this the wettest October on record, it was the fourth wettest month ever recorded in our area. Saturday brought about panic for guys farming in the bottoms along the rivers. Many were doing anything possible to get their crops out before any of the rivers crested. It is slow going for everyone as you cannot bring any trucks, wagons, or grain carts into any fields for fear of burying them. The neighbor down the road buried his combine and it took two Caterpillars to get him out. I would put corn harvest at maybe 8 percent complete as some folks have never started due to high moisture and no on the farm drying. Beans are maybe 30 percent complete. I guess we will see how much the beans rotted in the next few days. We are hoping for beans to go on Wednesday or Thursday in this area. It was 70 degrees today and we could use another six weeks of this weather. Many nervous folks around here and who can blame them. Corn yields are running anywhere from 170-240 and beans are running 35-54. Be safe everyone and best of luck with your harvest.

11/3 - Central Nebraska: 12 in snow just melted. Fields a saturated and corm is wet with little hope of drying down because of freeze before maturity. The USDA needs to wake up and smell the roses.
…
11/2 - Winnebago County, North Iowa: 9.8 inches of rain last 35 days -Winnebago River is bank-full slowing drainage-beans 40% harvested -corn -5% at most. Corn running from 24-30%. Won't turn a wheel here to at least Wednesday/Thursday on sandy ground. Local elevator can dry only 25,000 bu daily of 25% corn. Almost all reporting points in Iowa are showing from 2x to 3x normal rainfall from history in past 30 days. Tow ropes are sold out. Fields will look like war zones before this December harvest is over!
…
11/2 - Houston County, Minn.: Help me out here. I am confused. Just finished reading the crop comments. No harvest progress, beans to wet to combine or frosted while green. Corn molding, too wet to combine and many reports of very low test weight. Snow burying corn in Colorado and Nebraska. Flooding burying crops in Iowa, Illinois, Indiana, etc., etc. Was at the local elevator yesterday. They are in a bind because they have contracts to fill but either no beans are coming in or they have to reject them because of high moisture. Biggest crop ever coming in??? Where?

USDA’s "Biggest Crop Ever"

Agrimoney reports that USDA believes the crops have suffered minimal damage.

18:20 UK, 4^th November 2009, by Agrimoney.com
Informa cuts crop guesses - but not by much

Informa Economics has cut its estimate for US corn and soybean production - but not by much, signalling that it [and the USDA] believes the crops have suffered minimal damage from a delayed harvest and October frost.

The analysis group trimmed its forecast for US the corn harvest by 63m bushels to 13.06bn bushels.

The estimate for soybeans was trimmed by 50m bushels to 3.333bn bushels.

Many analysts have forecast losses of 100m-200m bushels [it will be much, much more] for a harvest which is the slowest since records began in 1985 thanks to rain both in the spring, which delayed planting, and in recent weeks, which has hampered field work.

'Good indicator'

The Informa data, which will be followed by forecasts from FC Stone later on Wednesday, is viewed by many investors as a reliable indicator of Washington thinking. [Not the reality]

The US Department of Agriculture will on Tuesday release its next monthly global crop supply and demand report, which are seen as highlights of the commodities calendar.

"Historically, Informa has been very close to the USDA," Iowa broker US Commodities said.

"In the last seven years… Informa has been within 20m bushels of the USDA November estimate [for soybeans]. The bottom line is that the trade should respect Informa's numbers [as if they were the USDA’s numbers themselves, and give them the respect the USDA is due—which is none at all]."

Informa's estimates leave it more optimistic on both corn and soybean than the USDA, whose latest forecasts were made nearly a month ago, before harvest delays and frost kicked in.

What The USDA Is Saying About 2009 Fall Harvest

Speaking of USDA numbers, below is a comparison between the USDA’s September and October estimates.

Why did production estimates get bigger in October for Arkansas, Illinois, Kentucky, Louisiana, and Nebraska???


What Everyone Else Is Saying About 2009 Fall Harvest

(Below are quotes from the articles above)

"We've had a lot of rainy years, but this one puts those to shame,"
"If a person's a farmer you start to think, 'Where am I going to sleep? How am I going to feed my children?'"
"More than ever, Louisiana producers are in need of disaster funds"
"If there's any way possible, I'll still farm, but you've got to look at everything, you know? I don't know what else I'd do."
“I fear many of our hardworking Mississippi farmers will no longer be able to operate due to the excessive losses faced this year”
"That's putting a lot of acres under water and makes other farm-land a lot harder to get to.”
“We're trying to get them out before the river gets them again,"
"It's bleak,"
"Now we are going to be lucky to make half a crop compared to the last couple of years, all because of the weather."
"we had a good soybean crop. The yield was there," he said. "We have lost at least 60 percent to 80 percent due to the weather."
"Our rice is going to be half,"
"We had a good soybean crop. The yield was there. We have lost at least 60 percent to 80 percent due to the weather."
"Dryers in Chicot are rejecting beans because their quality had deteriorated so much,"
"This is the worst I've ever seen and I've been a county agent for eight years and around farming all my life,"
"I have never seen such a discouraged bunch. It boils down to them saying, 'I'm not going to be able to pay my bills.'"
"It's bad,"
"I am afraid we will see a shakeup. It will be months before we see the full magnitude of how bad this fall has been."
"At this stage, yield and quality losses for Arkansas' major row crops could easily exceed $650 million,"
"There are a lot of fields that have above 25 percent damage due to the wet weather. I have heard horror stories of damage in the 80 percent range."
"Moisture discounts, foreign material, mold in the samples-- all these discounts add up to dollars. The discounts are getting pretty deep on soybeans."
"The longer it rains, the uglier it gets. Seed quality for soybeans for planting next year's crop could get tight. There's simply no good seed."
"[River and stream flooding] has completely ruined some soybeans.”
"Very little wheat has been planted and we're rapidly approaching the end of the optimum planting window. We'll almost certainly end up with the smallest wheat acreage in forever.”
"We can't put a dollar amount on the damage yet, but we've had lots of damage. It will be tremendous for soybeans. Most of the soybeans ready to be cut, before the rain started in September, will probably be a total loss."
"Some growers expect to go out of business in this region, based on the heavy damage to their soybean and cotton crops,"
"What are you going to do with that [five-hundred acres of underwater soybeans]? Just let it go I guess. It will be gone. I don't see any chance of the river coming back down anytime soon. So I think they're totally gone."
"Some of the guys have told me that harvest hasn't been this late since 1962, and that's a long time ago,"
"I haven't seen anything like this in 37 years."

AFP reports that black earth stirs investors in Russia.

Black earth stirs investors in Russia
By Eleonore Dermy (AFP) – Oct 11, 2009

OSTROGOZHSK, Russia — For years, foreign investors have been attracted by the gleam of Russia's vast reserves of crude oil.

But deep in the quiet, rolling landscapes of southwest Russia, it is not the seductive power of black gold that has brought foreign money into the country.

It is the more mundane appeal of black earth, millions of hectares of ultra-fertile agricultural land that foreign companies hope will provide the ideal answer to the world's changing food needs.

Swedish company Black Earth Farming (BEF) since 2006 has bought 300,000 hectares (740,000 acres) of Russian farmland after the government finally allowed land to be privatised after decades of state ownership.

"In Europe the price of land is very high," BEF chief executive Sture Gustavsson said as he surveyed the newly acquired lands in the Voronezh region some 600 kilometres south of Moscow.

In Russia, a hectare of land can still be acquired for several hundred dollars.

"It is a great challenge. But we are loving it," Gustavsson said.

Russia has tens of millions of hectares (acres) of chernozem, or black earth, considered a dream soil because of its richness in humus, which is formed by the decomposition of plant matter by micro-organisms.

The high humus content gives the soil an ability to retain moisture that makes it perfect for farming. The famous Black Earth region of Russia and Ukraine covers an area approximately half the size of Germany.

Yet while Russia has become one of the world's main grain exporters, the full potential of its vast agricultural lands remains unfulfilled, with vast tracts of arable land going fallow after the collapse of the Soviet Union.

As a result, the modern techniques that foreign firms can bring to the most traditional of industries are essential if Russia is to fully realise its potential.

"The foreigners have brought us innovative technologies and jobs," said the head of BEF's local subsidiary Agro-Invest Ostrogozhsk, Alexander Averyanov.

"When we arrived in 2006, just 30 percent of the land in the region was being cultivated while 70 percent had been fallow for five, seven, even 12 years," he added.

"We have worked for two-and-a-half years and now we have been able to start cultivation."

Other investors in Russian agricultural land have ranged from investment funds to foreign governments.

In April 2009, South Korean shipbuilder Hyundai Heavy Industries took a majority stake in Khorol Zerno, a firm which owns 10,000 hectares of farmland in Russia's Far East.

"The world needs grain more and more," said Dmitry Katalevsky, a financial analyst with Deloitte, pointing to a shift in Asian diets towards wheat, the development of bio-fuels and the rising global population.

"The surge in agriculture prices has prompted investors to become more interested in these goods, when before they had invested more in oil, metals and gas."

Russia has set ambitious targets to fulfill the export potential of its agriculture industry. [and these goals can only be reached by attracting foreign capital]

Agriculture Minister Elena Skrinnik has said Russia could raise its annual grain production to 120 million tonnes in the next 10-15 years, allowing it to roughly double its exports to 50 million tonnes annually.

This year the total grain harvest is expected to be 90 million tonnes, down from last year's bumper figure of 108 million.

Gustavsson admitted that the challenges remain enormous as the yield from the land being cultivated by BEF remains relatively weak and it will take years of investment to harvest the full benefits of the company's investment.

Meanwhile the price of grain has fallen after a spike in 2007 and foreign investors still have to cope with the hurdles of Russia's notorious bureaucracy.

And because of the lack of rural infrastructure -- a major problem for the Russian agriculture industry -- BEF is this year spending tens of millions of dollars on new silos to keep the grain harvests.

Such investment can only be welcome for Russia and President Dmitry Medvedev admitted last week that billions of dollars of investment were needed to expand storage facilities that currently hold only 30 percent of the harvest.

"Over the past 10 years we have understood that agriculture is not a black hole where money is lost and brings nothing for the state," Medvedev said.

Agweb reports that global farmland disappearing.

Global Farmland Disappearing
10/13/2009

An investment tip from Mark Twain: "Buy land. They're not making it anymore."

Farmland is disappearing across the world at an alarming rate. Hundreds of thousands of acres across the globe are disappearing due to climate change, erosion, and urban development. The American Farmland Trust estimates that farmland is disappearing at a rate of 2 acres per minute.

The National Soil Tilth Laboratory in Ames, Iowa, highlighted, “Each human on earth lives off the farming equivalent of about a third of a football field today. Population growth and urbanization will shrink that available land base in half by 2050.”

African farmland disappearing

Africa could lose 247 million acres of farmland by 2050 due to climate change according to Environment Science and Policy. This potential loss of farmland is substantial as the U.S. has approximately 246 million acres that support the top eight producing crops.
…
The study claims that if proper action is taken this far in advance, small farm communities can still be saved. Philip Thornton, co-author of the paper, noted “Though unsuitable for crops, the land could still sustain livestock, which are more tolerant to heat and drought.”

Although the African farmland can still be used as pasture, the farmland will no longer be fertile and be able to produce crops. This will significantly reduce the global production of grains and throw a curveball for the supply and demand of farmland globally.

U.S. farmland disappearing

Farmland has also been disappearing in the U.S. due to urban development. Farmland has been used to create new highways, industrial parks, and housing developments. The American Farmland Trust estimates that between 1992-1997, more than six million acres of agricultural land, an area the size of Maryland, was used for urban development.
…
The global land grab

Developing nations have begun to reconsider their future “food security." By 2050, the world will have to feed 3 billion more humans with significantly less farmland. To solve this dilemma, countries such as China, Saudi Arabia, South Korea, and United Arab Emirates have purchased farmland across the globe to ensure a consistent availability of grains. The countries have sent expatriate farmers who will harvest the crops and directly export the grain back to their home country.

Saudi Arabia has spent $100 million to lease land in Ethiopia to raise wheat, barley, and rice. In Sudan, South Korea has signed deals for 690,000 hectares, the United Arab Emirates for 400,000 hectares, and Egypt has secured a similar deal to grow wheat. Private companies are also acquiring land. Sweden's Alpcot Agro bought 128,000 hectares of Russian farmland, South Korea’s Hyundai Heavy Industries acquired 10,000 hectares of eastern Siberia, and Morgan Stanley, an American bank, bought 40,000 hectares of farmland in Ukraine.

How is farmland going to be affected by this?

With this much farmland now at risk of being taken out of production, the demand for farmland will undoubtedly be affected. Farmland is a natural resource with no substitute and cannot be replenished. No more land is being made.

Whenever supply and demand curves become distorted, an investment opportunity can arise. The growing importance of farmland and the limited supply provides farmland the potential to become one of the best investments available over the long-term.

The USDA reports on the decline in sown area.

The Decline in Sown Area in Russia

According to data from the State Statistical Committee, total sown area in Russia slid from 117.7 million hectares in 1990 to 76.4 million in 2007. The decline is attributed in large part to a coincident drop in livestock inventories and a resultant decrease in the sown area of feed grains and other forage crops.


…

My reaction: The appeal of black earth farmland is attracting investors to Russia.

Black Earth Farmland Attracting Investors

1) Russia’s tens of millions of hectares (acres) of chernozem or black earth is considered a dream soil because of its richness in humus (see Pictures From Visiting Russian Farmland)

2) Foreign farmers, ranging from investment funds to foreign governments, have established successful, long-term agricultural enterprises in Russia

3) Russia has set ambitious targets for its agriculture industry, including raising annual grain production to 120 million tons in the next 10-15 years and doubling its exports to 50 million tons annually. These goals can only be reached by attracting foreign capital

4) In Russia, a hectare of land can still be acquired for several hundred dollars ($450 - $750 per ha depending on soil quality and soil/field condition. See Acquiring Black Earth Farmland).

Global Farmland Disappearing

1) Farmland is disappearing at a rate of 2 acres per minute.

2) Africa could lose 247 million acres of farmland by 2050 (See *****Disaster Feared As Desertification Spreads*****)

3) Between 1992 and 1997, over six million acres of agricultural land, an area the size of Maryland, was lost to US urban development.

4) Farmland is a natural resource with no substitute and cannot be replenished.

5) To deal with the farmland shortage, countries such as China, Saudi Arabia, South Korea, and United Arab Emirates have purchased farmland across the globe to ensure a availability of grains. Expatriate farmers are being sent to harvest crops for direct export back to their home country.

Russian agriculture’s untapped potential

The enormous untapped potential of Russia’s vast agricultural land stands in stark contrast with the overused farmland and desertification occurring in other parts of the world. As I reported before, Russia's agricultural sector is enormously underdeveloped.

Approximately 7% of all arable land on the planet is owned either by the Russian state or by collective farms. Of that, roughly 35 million pristine hectares lies uncultivated. (A hectare is about two and a half acres.) To put that into perspective, Britain has 6 million hectares of cultivatable land.

The land under till coughs up tiny yields due to poor work ethics and antiquated technology. The average Russian grain yield is 1.85 tons a hectare - compared with 6.36 tons a hectare in the U.S.

Russia is the only place on Earth that has significant amount of farmland which is not in use. As uncultivated land comes back into production, Russia will become an agricultural powerhouse (a Saudi Arabia of wheat).


--------------------------------

Investing In Black Earth Farmland

Regia Russia Agro Investment Ltd (the fund I am starting to invest in Russian agriculture) is up and running and ready to receive subscriptions. Please, Email me for a copy of PPM.

With Black Earth farmland available at $670 per hectare, now is the time to act. Already, three other Ag funds have appeared on the horizon in Russia, and it is only a matter of time before money flows into the market and drives up prices.

Charles Bausman

I will be working with Charles Bausman to acquire Russian farmland. Charles is a Russia-based American with experience in Russian agribusiness who will run the fund’s operations on the ground (with my participation after I move to Moscow). Charles Bausman has great deal of experience (18 years) in working in Russia and speaks fluent Russian. Charles will identify, do due diligence on, and acquire properties, and then be responsible for setting up efficient management on the properties. He has already identified a number of properties for potential acquisition, and he is also a director of the fund.

I encourage you to contact him directly with any question about Russian agriculture or Regia Russia Agro Investment Ltd. Charles also has extensive experience in fund management and should be able to answer all your questions.

Regia Fund Strategy

The Regia Fund will make value acquisitions of prime Black Earth farms, farmland, and associated infrastructure (buildings, grain storage facilities, equipment). The Fund will acquire land both in long term leases and as property. The fund will further install high quality efficient management of these farms and provide them with the necessary financing to operate efficiently with the goal of owning producing farms generating positive cash flow and net income.

Local Government Support. The fund will work closely with local and regional administrations to ensure government support for its projects. Local government encourages high-quality, long-term investors, including foreign investment, which can increase production, improve know-how and technological efficiency and employment. The fund will make use of the 15+ years experience and broad contacts of its executive management in Russia and the Black Earth region to facilitate these governmental relationships.

Legal Due Dilligence and Support: The fund will undertake extensive legal due diligence on the security of title on the land it acquires. The fund will retain a reputable European legal firm to provide written opinions as to quality of land title and to advice on other relevant legal issues regarding the operations of the fund.

Legal Structure: The fund will register and own a Russian legal entity which will be the operating company. Leaseholds, equipment, and property in title may be in the name of this entity or in other entities onshore or offshore, as is deemed advisable by fund management, pursuant to Russian legal requirements and the recommendations of the fund’s legal advisor.

Farm Management: The fund will seek to retain the best possible agronomic talent, relying primarily on Russian agronomist, while also retaining international agronomists where this is productive, to develop the best possible operations strategy for the farms it controls. The fund will use employee ownership plans to align the interests of shareholders and farm management.

Management Strategy: The fund will pursue a decentralized management method, viewing each operating farm as a separate operating unit, with its own management and oversight needs. Farm sizes can range from approximately 3000 to 7000 ha. The fund will seek to support individual farm management with professional expertise in accounting and financial control, human resources, receipt of government subsidies, acquisition and sharing of equipment, construction and or otherwise securing storage facilities, crop sale and hedging, agronomic expertise, and adequate funding for operations.

Operations Location: The fund plans to acquire properties in the Central Black Earth region of European Russia. The fund will seek to acquire farms in close proximity to each other to maximize management efficiency.

Executive Management Location: The fund’s executive operations management will be based in the Black Earth region, to maximize hands-on management of its operating units. Location will be determined depending on where acquisitions are initially made. The fund will not seek to manage operations from Moscow as is common with other large agro-holdings, because this has proven to negatively impair operating efficiency.

Equipment: The fund will purchase modern, efficient machinery (combines, tractors, etc.) to make its farms as efficient as possible.

Main Crops: The main crops grown will be those typical for the Black Earth Region; wheat, rye, barley, sunflower, potatoes, beets, among others. The fund will also explore introducing soy cultivation, which is a less common crop in these regions. The fund will also consider fruit cultivation – primarily apples and cherries. Final decision on which crops to produce will depend on local and market factors to be decided opportunistically. The fund will not engage in dairy or livestock as a major activity, however might do so in order to meet local government requirements or requests.

Markets: Produce from the farms will be sold primarily to internal markets, either directly to processors or to Russian grain brokers. Transport infrastructure in this region of Russia is well-developed relative to world standards.

Other investments: The fund will reserve the right to make selective, non-primary investments in non-cropping activities, most likely in on-site food processing, if the fund management determines these projects to have a high likely return on investment.

Land Speculation: While the fund anticipates that land values will increase, it will not engage in pure land speculation, as this is discouraged by Russian authorities. This means that it will operate the land that it acquires with the goal of generating profitable revenue.

Identifying Acquisitions: Quality of farms in the Black Earth Region can vary significantly from property to property depending on soil quality, proximity to transport (rail and road), availability of storage, and quality of local management, and attitude of local government. Strong local contacts and connections can yield very advantageous acquisition opportunities. Fund management possesses these contacts and will make use of them.

Minimum size: The fund estimates that the minimum capital needed to acquire and operate an adequately funded farm is $US 3 million. This would allow for the initial acquisition and operation of a 3000 ha farm, and access to Russian farm credit and subsidies.

Target Size: The fund will seek to increase the quantity of land under its control to the maximum which is realistic to manage and farm productively, subject to availability of future funding. Experience of other investors shows that it becomes progressively more difficult to manage farms as they grow over a certain size, and that properties over 100,000 ha begin to present management challenges which can reduce efficiency, however there are exceptions to this. The fund will grow to as large a size as possible given management and other constraints. It is estimated that the land under control could end up being between 100,000 and 500,000 ha. The fund will seek to grow in size organically, i.e. at a rate at which it can properly operate land under its control. It will seek to avoid the experience of other investors, both Russian and foreign, of acquiring large amounts of land without having the management systems in place to operate them, which then resulted in low-quality management and large operating losses.

Funding and Subsidies: The fund will make full use of available government sponsored Russian farm credit, with a rough goal of a debt to equity ratio of about 50%. The fund will also make full use of any available Russian government subsidies, both federal and local.

Exit Strategies: The fund will aim for exit strategies that optimize investor value. Possible strategies are future round private placements, an IPO, SPOs, opportunistic sale of assets to other operators, strategic investors, etc. Anticipated time horizon for full or partial exits such as these is from 3 to 5 years. The fund has no fixed time frame for exits, and will pursue them on an opportunistic basis.

Dividends: The fund will initially reinvest profits into attractive acquisition opportunities which are expected to likely continue for 2-3 years. As the fund matures, if it is in the interests of shareholders, the fund will distribute dividends.

Fund’s Structure

*** Private equity fund
*** Fund name: Regia Russia Agro Investment LTD
*** Fund administrator: Cortland Fund Services LLC
*** Fund location: British Virgin Islands (with Russian subsidiary)
*** Management fee: 2 percent per year paid quarterly
*** 20% performance fee paid on exit (profits measured in gold)
*** 1% placement fee
*** 10% discount (.9 grams of gold per share) for first 100,000 grams of gold invested
*** Quarterly net asset valuations (with updates via blog and email)

Term

The Fund's initial term is five (5) years although this is subject to additional one/two year periods of extension at the sole discretion of the Board of Directors.

Close-ended fund

The Fund is a close-ended fund and, as such, its Shareholders do not have the right to request redemption of their Shares. However, where the Fund’s terms is extended beyond five (5) years, the Fund intends (but is not obliged) to offer shareholders the option to redeem some or all of their Shares on the 5^th anniversary of their initial subscription.

Goldmoney Subscriptions

Regia Russia Agro Investment Ltd is using Goldmoney to receive subscriptions. GoldMoney is a digital gold currency founded in 2001 by James Turk which allows the instant transfer of gold, silver and platinum between user holdings.

Subscriptions are in gold (1 gram of gold per share), and the minimum subscription amount is 3500 grams of gold, which is about $122,500 right now ($35 per gram). As gold appreciates, the minimum investment will be lowered as appropriate.

There is a 10% discount to the Offering Price (.9 grams of gold per share) for first 100,000 gram of gold invested in fund.

Here is the link for opening a Goldmoney account. The process is simple and transparent

Gold-eagle explains why Indians love gold.

(emphasis mine) [my comment]

Why Indians Love Gold

…
From time immemorial Indians have been in love with Gold. The predominant Hindu population finds mention of gold as a commodity of immense value in their religious books. Some of these religious books like the "Vedas, Puranas, Upnishads" are believed to date back a few hundred thousand years. The revered "GITA" is believed to be a sermon by Lord Sri Krishna given more than 5000 years back. In most religious books there is mention of gold as a metal of immense value. Hindus believe that Gold is a metal of demi-Gods and monarchs.

From ancient times Gold (and gold jewelry) has enjoyed safe-heaven status. In India Gold continues to enjoy safe heaven status even today. Gold jewelry is worn by all women irrespective of their religious beliefs. A large number of Indian men also wear Gold jewelry as neck chains, bracelets, and rings (on fingers). Gold jewelry is popular among Indians for the following reasons.

1) Jewelry is worn for ornamental value on all social functions, festivals and celebrations.

2) At one point in time there was 97% income tax in India. This resulted in large scale tax evasion. Large population spread over a significant area and lack of adequate computerization are some other reasons for tax evasion. The tax reforms of the last several years have indeed reduced the level of evasion. Still a lot remains to be done. It is believed that there is a parallel economy running in the country. The cash component of the unaccounted wealth can not be kept in Banks (if kept in Banks it would have to be accounted). This unaccounted wealth can not be kept in safe deposit vaults as it has to be hidden from the tax authorities. Gold jewelry is the most convenient option as it occupies very little space (so easy to hide) and does not have the risk of being damaged during storage.

3) The Indian rupee is not convertible on capital account. This means that it is illegal for an Indian (resident in India) to keep any foreign currency in his possession or in his portfolio. Foreign exchange regulation act (FERA) and conservation of foreign exchange and preservation of smuggling activities act (COFEPOSA) prescribe deterrent punishments for violators (including detention for long periods without bail or trial). It is also illegal to keep Gold in unworked form (pure gold). As a result, in the prevalent scenario, Gold jewelry is the only way to protect against depreciation of Indian rupee against US$.

4) A large population in India lives in villages. A large number of very poor people do not have proper houses to live. These poor people have very little assets. Whatever little they have they must keep in their possession 24 hours a day (as they do not even have a house to keep their belongings). Gold jewelry worn on their self is the only option. When in crisis they mortgage it or sell it. Floods and drought force many people living in villages to flee to a safer place. It is easy to carry gold jewelry while fleeing in distress.

5) In the long term the Indian rupee price of Gold has been in an up-trend. Inflation has continuously, year after year, eroded the value of currency. Real estate has been the best bet. Gold jewelry has been the next best option. Despite the fact that $ price of Gold has been in a bear trend, Indians continue to believe that Gold is a hedge against inflation. The following is the Indian rupee Gold price chart from 1993 onwards. The downward price movement from 1996 has been for two reasons. Firstly, $ price of Gold has gone down by 25% in the same period. Secondly, the Indian Gold import regulations have been liberalized. Some benefits of liberalization have been passed on to the consumers in the form of lower rupee prices.

6) Due to import duty and other limitation on imports, the price of Gold in India is always higher than the international price. Therefore, India continues to import Gold year after year.

Yearly Indian Gold imports



India as a country is heavily long gold

Based on India’s yearly gold imports, there should be over 10,000 tons of gold circulating in India in the form of jewelry. These 10,000 tons of jewelry is worth about $381 billion at $1080/oz. This huge supply of gold jewelry acts as a second unofficial currency in India.

The appreciation of gold will create tremendous inflation in India!

When global gold prices soar, gold owners in India (nearly the entire population) are suddenly going to find themselves much richer. With their new found wealth and greatly increased purchasing power, they will be willing to pay a lot more for what they want (food, clothes, etc…). So rising gold prices are going to result in out of control inflation in India, with will lead to a surge of raw material imports (as is already happening in China).

Implications are staggering

Consider these two facts:

1) Both gold and the yuan are undervalued by over 40%.
2) China's population is 1.3 billion and India's population is 1.2 billion. Together, China and India make up 38.5 percent of the world’s 6.5 billion people.

As the dollar collapses and gold/yuan appreciate, India’s and China’s enormous populations are going to start sucking up the world’s raw goods (food, energy, metals) with their increased purchasing power.