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Grain prices soar as global inventories shrink

Danubian's picture
Food producers call for action as grain prices soar

Lauren Etter and David Kesmodel | February 15, 2008

WITH the price of wheat and other grains soaring, US food producers are calling on the Government to help farmers ratchet up output.

Some are calling for loosening a federal conservation program that compensates growers for leaving fields fallow. Others are calling for restrictions on exports, an effort that is unlikely to gain traction but one that illustrates the depth of their concerns.

So far, the Government has resisted, but the growing chorus for government action signals a new phase in a long-term shift in the global grain markets.

For years, US farmers have complained about low prices brought on by overproduction. Now, surging demand from emerging nations and the biofuels industry have sent prices sharply higher.

[url=,,23214476-36375,00.html?fro... here[/url]

139 users have voted.


Jeremy's picture
Jeremy 2008 February 19
It's noticeable here in prices of flour, I suppose it's because we subsidize corn for ethanol, but corn is not a good crop for environment or diet, especially since it is used in lots of processed foods.
Can you imagine, I am using whole wheat for desem now! I think I will mix in naked barley, Kamut and other grains as substitutes!

Danubian's picture
Danubian 2008 February 19
it's nonsense utilising good arable land that until now has produced food for human consumption to produce fuel for burning. Scientists long ago figured out the input output equation doesn't produce a total energy yield benefit. If this isn't curbed many around the world will starve so the West can have cars to go down to the corner store for more junk!!

But I fear it's going to worse before it gets better.
Croc 2008 February 19

[quote=Jeremy] but corn is not a good crop for diet[/quote]


is that for real? care to put more light on this?

i been always told that corn is good for you, especially if you have blood problems of any kind.


Jeremy's picture
Jeremy 2008 February 19
Corn syrup for instance, I am off to work but on my blog there is a bit on corn! There was also an article in the NY Times a while back about how the buffalo should roam on the plains rather than fields of corn or wheat!

Croc 2008 February 20

i'm still confused, how is it bad to have corn in your diet?

as for soil depleting, i believe that anything you plant is soil depleting, some more some less and if i were to blaim anyone or anything for soil depleting i would point finger at us people that are careless what they plant and where.

anyway i don't care about that one so much just interested to know why corn is bad for us.


doughman 2008 February 27
Yesterday, I easily spent $78  for 3 bags of bread flour (non-organic and enriched).   That's $28 for a bag of bread flour 50 lbs (22 k).  Last month...that same bag of flour was $19.  Puhhh.  I would hate to think how much a bag of oragnic bread flour costs.
Danubian's picture
Danubian 2008 February 27

as far as I can tell, are low, but currency debasement or depreciation is rife! 

The phenomena of rising prices in monetary climates such as this are exacerbated by flows into tangibles. All fiat money is 'hot'; investors - corporate and other - are looking for profit, protection and value. The oscillation of money ebb and flow from one market to another, be they bond, commodity, security, or realestate, at the current speed is very destructive.

Danubian's picture
Danubian 2008 February 29

Gold moving up in all currencies can mean only one thing ............. paper depreciation/debasement, (the real meaning of inflation), the real/proper meaning of the word inflation has been lost in the euphemistically used incorrect definitions peddled in the halls of government, higher learning, and banks, diseminated by through the media.

it will take more paper to buy the same goods; grain & bread included!

 Exchange Rates


(Exchange rates displayed are the middle point between bid and ask)





NY Time






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Danubian's picture
Danubian 2008 February 29
occured when money was made fiat. The time was 1971 when the scam was made legit, but by now it should be clear that the extent is really global. What we see now is the continuation of the fraud with disaster looming larger. The objective monetary measure is telling the true tale of debasement of our money; a transfer of our wealth to the perpetrators of the scam.  Producers, savers, and labour til now have been cliped here and there. But they have been readied for a massive shearing that's going to be painful with no one able to escaspe.


Danubian's picture
Danubian 2008 March 1
[quote=Jeremy]It's the end of the world as we know it...and I feel fine- REM

There's no reliable way to predict how or when the fiat money unraveling will unfold, but unravel it surely will. That much is in the maths. Global debt, and derivative expopsure are a symbiotic pair, they grow in concert. There are only two alternatives left for the debt and derivative exposure to be dealt with, the third (paying it down) is no longer possible. The the two alternatives are 1. currency debasement (inflation and or hyperinflation), 2. default (deflation). Both will shake off the debt incubus in different ways but the end result is the same, the tower will come down.

The purpose of posting the chart was not to predict ".....the end of the world as we know it", but to show that real goods and services - meal, grain, bread, etc. - has been and will continue to rise in price, not because they are becoming 'more expensive' but because our money is being debased.

So while global grain inventories are low they don't explain the 50% increase in grain prices over the last three months, especially since there have been 'up-limits' placed regularly over that time on major American commodity exchanges. Something else is having a profound impact. The up movement of gold, which is the same as saying, the down movement of paper money, over the last seven years tells the real tale. More specifically, last nights chart shows that every paper currency is losing its purchasing power.
Danubian's picture
Danubian 2008 March 1
[quote=Jeremy]So is globalization a mistake? Are we growing too fast, should we slow down?

Globalisation means consolidation and extension of the scam, dollar hegemony if you like. Globalisation has provided the dollar with a new market; had globalisation not been allowed the dollar scam would have been wiped out earlier. But there is plenty more sinsiter going on, the scam is really a trap! Time is running out for the dollar scam, now before the end governments allow private hands (read transnational corporations) to exchange their worthless paper and electronic dollars for real public assets all over the world at the expense of those communities who own them. Privatise the asset and the ongoing value while leaving the liability to the public.

In short, globalisation is globalising the massive transfer of wealth into fewer powerful private hands.

To say "globalisation" is a mistake depends on your perspective; I'm sure the perpetrators of the scam wouldn't have it any other way.

Too fast, slow down? The speed isn't the problem, its the paradigm. But it's too late for this one, the transfer has largely occured and the liability is about to be handed down.
Panevino 2008 March 1
Interesting thing just happened to me.  Before the new year my flour salesman called me to warn me that the organic flour that I use would be going up to $45/20kg bag, from $23 per bag.  I shopped around and found the same flour for $38.50/20 kg: same flour under a different brand name.  I called the regional manager and told him the little known competitor's price and he said that there was no way because the price to him was higher than the $38.50.  I just received a new batch of flour from the more expensive supplier (I was stuck and needed some in a pinch) and it's dropped to $39.50 from the quoted $45.00.  The point being, that in these times of scarcity, people will try and take advantage if we let them.


Danubian's picture
Danubian 2008 March 1
There's an astonishing amount of ignorance in regard to matters of money and all things economic. Suffice to say, economic and political journalists, universities as well, have succeeded in obfuscating the real issues and ridiculing any idea that a viable alternative exists. In fact the "TINA" doctrine (There Is No Alternative) is the mantra embedded deeply in our students and taken as a given. So most are still asleep, they still have TV and other mindless pursuits to keep the illusion alive that everything is well.

Oh yes, scape goats will be found to divert our attention but you can bet things will largely be done with subterfuge. But Lincoln's dictum still stands. Lets hope enough this time will see through the scam.
Panevino 2008 March 1
I'm just making a different point in light of what is being said.  If I hadn't called the salesperson on the discrepency in prices, the "crisis" would have gained even more traction at the local level, maybe further increasing the price of the flour.  He was justifying their higher prices because of global blah blah.  At one point he even said that we may run out of organic flour altogether (starting to sound like oil?) ... PANIC.  Higher prices.  PANIC.  Higher still.

Whatever the causes, some people exploit the situation and they should be called on it.  The big picture surely matters but at the local level, where I and others bake and live, I managed to save $5 a bag (for now). That means my bread is more accessible to more people, which is good.  I guess I could hide behind the crisis and raise prices even higher but don't feel right with that.  I'm making Just a small (significant) point, but felt compelled to make it.  I can't change the big picture, but small local actions can hopefully "trickle up".

PS: I'm never this optimistic, just thought I'd try it on!

Danubian's picture
Danubian 2008 March 1
[quote=Panevino]The point being, that in these times of scarcity, people will try and take advantage if we let them.
[/quote]My emphasis

Tony, I was referring to this statement quoted above.

I can appreciate what you're saying, and the warning you are passing on to others to beware is valid.

Yes inventories have moved lower but it's not "scaricity" but any stretch of the imagination. However, it's clear that lower inventories haven't impacted on grain prices nearly as much as currency debasement. If you want to test my assertion just cast an eye over the CRB Index, an indicator of all commodities, and you'll find it has been steadily rising and it's up year on year. It's not just grain, but all commodities.

However, the most tell tale indicator is the movement of gold. When it rises in terms of the USD that's one thing, but when it is rising in terms of every major currency that is entirely another matter, it couldn't be more conclusive.

Danubian's picture
Danubian 2008 March 3
is born and bred for scam! But you're correct , Jeremy, the USD is in deep do do.

When I get the time, I'll post to this thread some details of exactly how the scam works in practice so it'll be plain to see how we are being fleeced. Those in debt especially, but even those not in debt need to pay attention because you're being tapped by vampires whether you're aware of it or not.
Danubian's picture
Danubian 2008 March 7

To demonstrate; at the heart of the current "fiat" system the elite (read Central banks, money centre banks, and governments) fleece us through "seingniorage" and debt creation. This is unnoticed by most, I'd reckon only one man in a million can see the victimisation. We are being fleeced in more ways but this is at the heart.

So, what is Seigniorage?

Let me quote from AE Fekete an amusing story of the Henry The VIII of England.

[quote=Fekete]"Seigniorage and the Plight of Old Coppernose
Let us return for a moment to times when the king counted it among his powers to dilute the purity of the coin of the realm unilaterally. The king wouldn't even bother telling his subjects what he was doing to their money. The longer they could be kept in ignorance about the matter, the greater was the tribute the king could extract from them. Contemporary scholars theorized that this power of the king was of divine origin. They invented the word "seigniorage" to apply to the cut which the sovereign took of gold delivered to the Mint for coinage. For example, if the Mint exchanged one ounce of pure gold for a coin containing only nine-tenth of an ounce, then seigniorage was said to be 10 percent. The beauty of it was that seigniorage could be increased at the pleasure of the sovereign, at least in the beginning, surreptitiously. The new lighter coins were given an identical appearance to that of the old. Then the king could pass on the light coins as if they were full-bodied, defrauding his subjects and his creditors. However, this new source of revenue which the king's scientists have worked so hard to generate turned out to be ephemeral. The people got wise to the fraud and made all light coins subject to an appropriate discount. Still later, they expected the fraud to be repeated even before the newly crowned king had a chance to try his hands at it. So much for the divine right of the sovereign to cheat his subjects and his creditors.[/quote]

[quote]Poor Old Coppernose, King Henry VIII of England, was so nicknamed by his subjects after the success of royal scientists in figuring out a way how to increase seigniorage to 90 percent. No doubt, his predecessors would have done it if they had known how. But there was a problem. Gold diluted by the addition of 90 percent base alloy no longer looked like gold at all. It was the scientists working in the king's pay who invented "clad coinage" (anticipating the American Mint replacing the Kennedy half-dollar, an immensely popular silver coin, with a clad version in 1968). The coins of Old Coppernose were gold-plated copper coins. But as the plating was rather thin, after a few years of circulation the gold wore off at the most protruding part of the obverse, which was the king's nose, revealing the true nature of the core.[/quote]

[quote]Old Coppernose would have loved to increase seigniorage to 100 percent, but the royal scientists failed to figure out how it could be done. For this breakthrough the world had to wait awhile longer, when the bloody overthrow of the monarchy in France opened the way to irredeemable currencies called assignat and mandat - and to the guillotine. But this is another story.[/quote]

From his paper called the [url=][b]Tale of the Fourth Lie[/b][/url]

You may well ask how this applies to modern money? Surely our governments and banks don't clip our money? Oh yes they do!

Central banks print notes that circulate as money. When the Central Bank issues the notes its value is only derived from the act of acceptance by the citizens of that nation, not by the act of issuance. It's the acceptance that gives them their face value. As convention all citizens accept the paper at their face value. In order to accept those notes all citizens, individual and corporate, have exchanged real goods and services to the value of 100$. This is the same as saying we've earned the money. It's the acceptance of those notes that gives them value, as the act of acceptance entails exchange of real goods and services.

Lets be generous and assume the paper and the ink cost for every 100$ bill amounted to 10$ of value, that would mean that 90$ of value from every 100$ note seems unaccounted for. But not so it is extracted from citizens and appropriated to the bank. Seigniorage of 90% is the same as saying 90% of the value you produce is taken away from you surreptitiously, but only 10% is left to you.

Further, when money is digital as most is now the production cost of 100$ is smaller still,  indeed perhaps only 2%. This means that the appropriation is now 98% of value. Every time we use this money we allow our pockets to be plundered, our hard work in exchange for a plate of beans.

To add insult to injury, we who give these notes value are made to pay interest on our own created value!

The fact that very few, perhaps one in a million, ever question this inappropriate privilege reveals that this ignorant acceptance has become part of modern discourse.

More in a few weeks.

TeckPoh's picture
TeckPoh 2008 March 7
How can this be? I must go and refresh my knowledge of Econs having left it for more than 10 years back with my previous life.
Danubian's picture
Danubian 2008 March 8
You probably won't find much straight talk in econ books about this if at all, and if you do it'll be couched in such a way not to alarm the readers. It seems to have worked, economists in the media feed us clap trap with monotonous regularity.
tony dench from .dench bakers. in melbourne's picture
tony dench from... 2008 March 8
it aint just us greedy Westerners any more although we might have wished it. Look to India and China producing cheap cars, maybe $2000 equivalent. Think what that'll do to fuel prices/availability/chain-store fast food outlets. Buy McDonalds shares, we could guarantee our seat onto the next rocket out of here. Maybe Mars will produce better harvests.
Danubian's picture
Danubian 2008 March 14
Hi Gul,

Thanks for posting this. Strange how many of us have become sufficiently removed from food production (the word 'production' seems to have taken on a commercial or industrial dimension and never applied to domestic instances which illustrates the point) to instill a lack of confidence or inability to see the possibilities. But to be self sufficient now that the need is on the horizon would deffinately have a positive impact on our daily lives.


The ugly face of Ug99

Joanne Finlay (Australian Life Scientist) 01/03/2007 10:30:12

"Keynote speakers at a symposium on rust diseases held in Sydney last week said that a virulent new stem rust known as Ug99 posed a threat to wheat crops worldwide.

According to an international organisation set up to combat the disease, the Global Rust Initiative (GRI), the amount of stem rust now in the world might be very small, but there is about to be a lot more.

"Ug99 defeats the resistance that has protected most of the world's wheat for 40 years," the GRI's facilitator, Dr Rick Ward, told the meeting.
From [url=;932959663;fp;4;fpid;2][b]here...

Danubian's picture
Danubian 2008 April 22
Professor Fekete's theory of money movement between the bond and the commodity market. [url=]here[/url]

The propensity to hoard

Mainstream economics bypasses the problem of hoarding altogether. It suggests that in the modern economy with a well-developed capital market hoarding is either non-existent, or if it is practiced at all, then the practice is confined to boorish and uninformed people whose action can be safely ignored as unimportant. However, economists can dismiss the phenomenon of hoarding and its consequences only at their own peril.

There may be more to hoarding than boorishness. It is well-known that informed producers regularly use sophisticated inventory-management techniques involving the speeding up or the slowing down of input and output at either end of their production line. The means of hoarding are just as ingenious as its objects are varied. The practice is certainly not confined to housewives buying more sugar to fill up their pantry, nor to small-time smugglers holding contraband merchandise in mountain-caves. They also include big multi-national firms using the most up-to-date techniques such as inventory-padding or the deliberate use of leads and lags in warehousing. In recent times cutbacks in production quotas of highly marketable goods such as crude oil have been utilized for the same purpose with dramatic effect.[/quote]

Rice, death and the dollar   

By Spengler

The global food crisis is a monetary phenomenon, an unintended consequence of America's attempt to inflate its way out of a market failure. There are long-term reasons for food prices to rise, but the unprecedented spike in grain prices during the past year stems from the weakness of the American dollar. Washington's economic misery now threatens to become a geopolitical catastrophe.

Months ago, I offered that China, Russia and other cash-rich nations held the antidote to the incipient credit crisis: "If the US wants to remain the magnet for world capital flows it became during the 1990s, it will have to allow the savers of the world to become partners in the US economy, that is, to buy into its first-rank companies."(Western grasshoppers and Chinese ants, AsiaTimes Online, September 5, 2007.)

No such thing occurred, of course, as Washington has made it clear that it would not allow sovereign funds to own the likes of Citicorp. What are the world's investors doing with the trillion dollars a year they used to invest in American securities, including subprime derivatives and various forms of collateralized obligations that turned out to have more obligation than collateral? They aren't buying American companies because they are not permitted to. They are buying food and other stores of value instead.

Washington has weakened the value of the dollar as a palliative for the credit crisis, so much so that "nobody seems to doubt that the US dollar will lose its status as the world's reserve currency",..............

"China is exchanging its depreciating reserves of US dollars for things of value, notably rice, with frightening consequences for dependent countries, and deadly consequences for American foreign policy.

The chart below shows the price of 100 pounds of rice against the euro's parity against the US dollar during the past 12 months. The regression fit is 90%. There is an even tighter relationship between the price of rice and the price of oil, another store of value against dollar depreciation.

Rice price vs Euro/US$ rate, April 15, 2007 to April 15, 2008
As the chart makes clear, the ascent of the cost of rice to $24 from $10 per hundredweight over the past year tracks the declining value of the American dollar. The link between the declining parity of the US unit and the rising price of commodities, including oil as well as rice and other wares, is indisputable. China has bid aggressively for rice all year, and last week banned rice exports, along with Vietnam and several other producers.

Euro/US$ rate vs rice and oil, April 16, 2007 to April 16, 2008
The rest is [url=]HERE[/url]
Danubian's picture
Danubian 2008 April 23
Japan's hunger becomes a dire warning for other nations Being a rich nation is no protection for Japan, which faces the  fallout of relying too heavily on foreign food to supply domestic needs.

Food fears: Being a rich nation is no protection for Japan, which faces the fallout of relying too heavily on foreign food to supply domestic needs.

  • Justin Norrie, Tokyo
  • April 21, 2008

MARIKO Watanabe admits she could have chosen a better time to take up baking. This week, when the Tokyo housewife visited her local Ito-Yokado supermarket to buy butter to make a cake, she found the shelves bare.

"I went to another supermarket, and then another, and there was no butter at those either. Everywhere I went there were notices saying Japan has run out of butter. I couldn't believe it — this is the first time in my life I've wanted to try baking cakes and I can't get any butter," said the frustrated cook.

Japan's acute butter shortage, which has confounded bakeries, restaurants and now families across the country, is the latest unforeseen result of the global agricultural commodities crisis.

A sharp increase in the cost of imported cattle feed and a decline in milk imports, both of which are typically provided in large part by Australia, have prevented dairy farmers from keeping pace with demand.

While soaring food prices have triggered rioting among the starving millions of the third world, in wealthy Japan they have forced a pampered population to contemplate the shocking possibility of a long-term — perhaps permanent — reduction in the quality and quantity of its food.

A 130% rise in the global cost of wheat in the past year, caused partly by surging demand from China and India and a huge injection of speculative funds into wheat futures, has forced the Government to hit flour millers with three rounds of stiff mark-ups. The latest — a 30% increase this month — has given rise to speculation that Japan, which relies on imports for 90% of its annual wheat consumption, is no longer on the brink of a food crisis, but has fallen off the cliff.

According to one government poll, 80% of Japanese are frightened about what the future holds for their food supply.

Last week, as the prices of wheat and barley continued their relentless climb, the Japanese Government discovered it had exhausted its ¥230 billion ($A2.37 billion) budget for the grains with two months remaining. It was forced to call on an emergency ¥55 billion reserve to ensure it could continue feeding the nation.

The rest is [url=
mm123 2008 April 30

Some are calling for loosening a federal conservation program that compensates growers for leaving fields fallow. Others are calling for restrictions on exports, an effort that is unlikely to gain traction but one that illustrates the depth of their concerns.

So far, the Government has resisted, but the growing chorus for government action signals a new phase in a long-term shift in the global grain markets.

For years, US farmers have complained about low prices brought on by overproduction. Now, surging demand from emerging nations and the biofuels industry have sent prices sharply higher.

Danubian's picture
Danubian 2011 February 8
The Real Reason for Rising Commodity Prices

February 3, 2011 – An article today in The Wall Street Journal highlights the latest rise in the price of wheat. Blaming bad weather, it notes that the “global wheat market is caught between freezing winds and a sirocco.”
The WSJ therefore warns that “investors should beware of whiplash as weather normalizes.” Given that wheat is “up 13% since the start of December”, it is good advice – if weather were to blame.

The reality is that wheat is being driven higher by more than bad weather. The price of wheat has been climbing since June, a fact conveniently ignored in the WSJ article, perhaps because it doesn’t square with its premise that bad weather is causing higher wheat prices. Are we to believe that the market knew seven months ago that weather around the world today would be so bad that it would impact global wheat output? Or has wheat – which has risen $3.50 per bushel, or 70%, since its June low – been climbing steadily higher over these several months for another reason? And more to the point, why are all commodity prices rising?

For example, since June copper has risen $1.70 per pound, or 59%. Is bad weather to blame?

No, of course it isn’t. Something else is at work here. Maybe wheat has risen more than copper over this period because bad weather really has had some impact on wheat production. But obviously, given that commodity prices are rising across the board, we have to look for other factors that are causing this surge in prices. And we do not need to look too hard. Just consider the money printing – a/k/a “quantitative easing” – by central banks going on all around the world. QE is building up tremendous inflationary pressures in the pipeline of goods and services, which for months now has been showing up in the area most sensitive to monetary debasement, namely, commodity prices.

The WSJ article ends by warning that “political storms could provide a tailwind for wheat prices.” That could be, but right now, the gathering monetary storm is far more important, and there is one easy way to seek shelter – buy physical gold. Look at the correlation between gold and the CRB Continuing Commodity Index in the following chart.

The above chart makes one point crystal clear. Rising commodity prices are not short-term phenomena. Except for a brief deflationary blip in 2008 after the collapse of Lehman Brothers, this CRB Index of 17 essential commodities has been rising steadily all decade – and it is meaningful to note, so too has gold.

So I wouldn’t worry about any shortage of wheat, provided you own physical gold. Farmers will continue to grow produce, and the market in which money is exchanged for food will continue to function as it has since humankind began to interact in commerce thousands of years ago. So regardless what happens to the price of wheat, you will continue to buy bread in the future just like you do today, provided you have physical gold to preserve your purchasing power from the ongoing debasement of national currencies being engineered by governments and central banks.

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