Work in Progress

UPDATE: December 18, 2009

Read finished article here:

*****2010 Food Crisis For Dummies*****


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


I currently working on an article focused on the imminent food shortage and, more importantly, the consequence of higher food prices for the US and global economy. I am trying to keep it short and to the point. Below is a preview of what I have finished so far, the rest will be done tomorrow after I get some sleep.

If you read an economic, financial, or political analysis for 2010 that mention the food shortage looming next year, throw it in the trash, as it is worthless. There is overwhelming, irrefutable evidence that the world will run out of food next year. When this happens, the resulting triple digit food inflation will lead to the collapse of the dollar, the treasury market, derivative markets, and the global financial system. The US will experience economic disintegration.

The 2010 Food Crisis Means Financial Armageddon

Over the last two years, the world has experience faced a series of unprecedented financial crisis: the collapse of the housing market, the freezing of the credit markets, the failure of Wall Street brokerage firms (Bear Stearns/Lehman Brothers), the failure of Freddie Mac and Fannie Mae, the failure of AIG,
Iceland's economic collapse, the bankruptcy of the major auto manufacturers (General Motors, Ford, and Chrysler), etc... In the face of all these challenges, the demise of the dollar, derivative markets, and the modern international system of credit has been repeatedly anticipated and feared. However, all these doomsday scenarios have so far been proved false, and, despite tremendous chaos and losses, the global financial system has held together.

The 2010 Food Crisis is different. It is THE CRISIS. The one that makes all doomsday scenarios come true. The government bailouts and central bank interventions which have held the financial world during the last two years will be powerless to prevent the 2010 Food Crisis from bringing the global financial system to its knees.

Astounding lack of awareness

The world is blissful unaware that the greatest economic/financial/political crisis ever seen is a few months away. While it is understandable that general public has no knowledge of the economic pandemonium headed their way, that same ignorance on the part of professional analysts, economists, and other highly paid financial "experts" is mind boggling, as it takes only the tiniest bit of research to realize something is going critically wrong in agricultural market.

USDA estimates for 2009/10 are an insult to common sense.

All someone needs to do to know the world is headed is for food crisis is to stop reading USDA's crop reports predicting a record soybean and corn harvests and listen to what else the USDA saying.

Specifically, the USDA has declared half the counties in the Midwest to be primary disaster areas this year, including 274 Midwest counties in the last 30 days alone. These designated are based on the criteria of a minimum of 30 percent loss in the value of at least one crop in a county. The chart below shows counties declared primary disaster areas by the Secretary of Agriculture and the president of the United States.



The same USDA that is predicting record harvests is also declaring disaster areas across half because of catastrophic crop losses! To eliminate any doubt that this might be an innocent mistake, the USDA is even predicting record soybean harvests in the same states (Oklahoma, Louisiana, Arkansas, and Alabama) where it has declared virtually all counties to have experienced 30 percent production losses. It doesn't take a rocket scientist to realize that these conflicting accounts mean the USDA is lying.

USDA motivated by fear of higher food prices

The USDA is terrorized by the implications of higher food prices for the US economy, most likely because it realizes the immediate consequence of sharply higher food will be the collapse of the US Treasury market and the dollar, as desperate governments and central banks dump their foreign reserves to appreciate their currencies and lower the cost of food imports. Fictitious USDA estimates should be seen as proof of the dire threat posed by higher food prices, as the USDA would not have turned its production estimates into a grotesque mockery of reality if it didn't believe the alternative to be apocalyptic.

Dynamics behind 2010 Food Crisis

Early in 2009, the supply and demand in agricultural markets went badly out of balance. The world was experiencing a catastrophic fall in food production as a result of the financial crisis (low commodity prices and lack of credit) and adverse weather on a global scale. Meanwhile, China and other Asian exporters, in effort to preserve their economic growth, were unleashing domestic consumption long constrained by inflation fears, and demand for raw materials, especially food staples, was exploding as Chinese consumers worked their way towards American-style overconsumption, prodded on by a flood of cheap credit and easy loans from the government.

Normally, food prices should have already shot higher months ago, leading to lower food consumption and bringing the global food supply/demand situation back into balance. This never happened, because the USDA, instead of adjusting production estimates down to reflect decreased production, has been adjusting estimates upwards to match increasing demand from china. In this way, the USDA has brought supply and demand back into balance (on paper) and temporarily delayed rise in food prices by ensuring a severe food shortage in 2010.

USDA induced overconsumption leading to disaster

It is absolutely key to understand that the production of agricultural goods is a fixed, once a year cycle (or twice a year in the case of double crops). The wheat, corn, soybeans and other food staples are harvested in the fall/spring and then that is it for production. It doesn't matter how high prices go or how desperate people get, no new supply can be brought online until the next harvest at the earliest. The supply must last until the next harvest, which is why it is critical that food is correctly priced to avoid overconsumption, otherwise food shortages will occur.

The USDA, by manufacturing the data needed to keep the supply demand in balance, has ensured that agricultural commodities are incorrectly priced, which has lead to overconsumption and has guaranteed disaster next year when supplies run out.

...
(finished article to be published in next 48 hours)



Finally, here are two cool graphics I plan on incorporating into finished article.


The first shows 2008 Soybean Production by country, which should be an accurate idea of where they were grown in 2009.




The second shows 2008 Soybean Production by country with soybean producing counties declared disaster areas in 2009 highlighted in red, which should be an accurate of how badly production was effected this year.





Here are the USDA's fictitious production estimates again, for those who are interested.

Soybean Production by State and United States

Production (1000 bushels)

5 year

USDA 2009 Estimates

Average

Aug

Nov

Alabama

6,114

14,080

15,910

Arkansas

111,779

127,300

128,060

Delaware

5,659

6,392

7,137

Georgia

7,484

15,360

14,850

Illinois

441,931

398,200

420,750

Indiana

259,870

246,600

249,780

Iowa

485,196

505,960

486,030

Kansas

104,300

133,000

156,950

Kentucky

49,594

57,200

64,860

Louisiana

29,624

35,000

35,890

Maryland

15,670

15,840

20,425

Michigan

76,587

73,630

77,610

Minnesota

278,520

284,000

298,200

Mississippi

59,995

88,970

77,040

Missouri

193,063

214,000

233,200

Nebraska

225,809

227,850

247,000

New Jersey

2,995

3,060

3,480

New York

8,405

10,332

10,836

North Carolina

43,882

56,320

59,840

North Dakota

104,078

116,000

115,500

Ohio

197,408

215,260

219,840

Oklahoma

6,793

8,250

10,360

Pennsylvania

17,720

20,025

20,915

South Carolina

11,972

15,930

15,120

South Dakota

135,970

159,100

172,200

Tennessee

40,616

62,400

62,730

Texas

5,342

5,250

4,485

Virginia

16,754

18,880

21,460

Wisconsin

61,494

63,570

66,830

Other

1,131

1,413

1,982

US

3,005,755

3,005,755

3,319,270



This entry was posted in Important_Announcement. Bookmark the permalink.

6 Responses to Work in Progress

  1. Thorleifur says:

    Ok intresting article which I found at marketoracle: http://www.marketoracle.co.uk/Article15802.html


    Across the Midwestern U.S. snow storms have wreaked havoc with the corn harvest. Iowa was hit with the worst snow storm since the 1950s. Estimates of that corn remaining in the U.S. fields, now awaiting Spring to be harvested, varies from 6% to 25% to 40%, depending on location. Estimated losses of that corn remaining in the field till Spring range from 25% to 40%. Thus far this situation has not caused stress on Agri-Food prices as the new U.S. corn crop was indeed large, and had just arrived.

    However, as Spring unfolds, we will know more fully how much of the U.S. corn crop has been damaged. A fair bet would be that the real economic U.S. corn crop, including the light weight of the harvested crop and that not already damaged by wet conditions or lost due to still being in the field, will be a lot less than the forecast numbers suggest. The real economic value of corn is not the volume in bushels, but the usable food content of the corn. And do remember, corn is not produced in a factory. A new crop of corn will not arrive in North America till Fall of 2010.

    According to this we will see the fall of 2010 as the timing?!
    What about Ukraine? they are selling all of their corn, but have famine at home.

  2. Trader says:

    Hi Eric, dollar seems very strong this last week.

    Europe could have their default sooner than USA & England.

    I guess dollar collapse will need to be delayed again. What do you think?

    What now can make the dollar weakening again beside this agriculture shortage problem?

  3. Jimmy says:

    World news: fake tungsten goldbars in Ethiopia

    http://jsmineset.com/2009/12/15/how-to-make-convincing-fake-gold-bars/

    On Wednesday, the BBC reported that millions of dollars in gold at the central bank of Ethiopia has turned out to be fake: What were supposed to be bars of solid gold turned out to be nothing more than gold-plated steel. They tried to sell the stuff to South Africa and it was sent back when the South Africans noticed this little problem.

  4. Gail says:

    It certainly appears that the midwest and other areas experienced damaging weather however, I can say that something in the atmosphere on the Eastern Seaboard is killing not just crops but trees. Cumulative ozone has been a problem for decades but recently the death plunge is occurring at breakneck speed. There has to be some more recent change to cause such a rapid decline. It could be all the nitrogen-based fertilizers for corn production, and/or the burning of ethanol itself. See the Stanford report released yesterday at this post: http://witsendnj.blogspot.com/2009/12/aauuuuuggghhhh-no-duh.html
    And for the longer term picture, this has two very good summations and a whole lot of questions: http://witsendnj.blogspot.com/2009/12/revelations-from-honest-forester.html
    Looking forward to your finished article. Small nitpick your two graphics both call counties countries.
    Gail

  5. Bowtie says:

    Eric, how do i get my ebay auctions for gold bars to show up on your site where you advertise from ebay?

    The site http://www.coinflation.com puts your auction in there if you mention their site on your auction.

  6. Dr Aziz says:

    Eric:
    Is it not possible that the government will, before long, impose exchange controls and price-fixing in attempts to control the inflation? I can see that happening really clearly.
    Such short-term fixes will fail, of course, but I can see them doing it.

    Dr Aziz

Leave a Reply

Your email address will not be published. Required fields are marked *

*

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>