, 21 tweets, 7 min read Read on Twitter
Bad weather in the United States and disease in China are threatening food shortages globally and massive inflation. Our national security and stability is at stake over the next few years.
One of the biggest reasons inflation has remained so low over the past half decade is record growing seasons in the United States and Russia for #corn #wheat and #soybeans However this year is the worst season on record as cold, rainy weather delayed #plant19 by several weeks.
Planting progress for all three crops was beyond dismal this year. In fact, it was the slowest planting progress ever on record and many farmers simply chose to skip this year.
Check out #plant19 to see how crops are growing this year. In many parts of the country corn only started to emerge at the beginning of July. Usually crops would be halfway grown by now.
Now, Tropical Storm #Barry is only making matters worse by flooding large swaths of the Southern United States.
zerohedge.com/news/2019-07-1…
Grain and soybean prices skyrocketed this year, breaking out of a 5 year channel. Corn topped out at $4.73 bushel, Wheat $5.57 and Soybeans $9.27. What interesting is not the initial price jump, rather its the second price rise post-4th July, an extremely rare occurrence
The only reason prices haven't gone higher is record yields for the previous 5 years. We have a massive overstock of grains to buffer a poor season or two.
In China, the situation is presumably worse, as swine fever and armyworms are decimating agriculture production in the country.
Armyworms are an invasive pest which destroys crops and spreads wildly fast. Already more than half (20) of Chinese provinces have discovered the insect and the remaining are highly threatened. Infected crop yields can decline up to 50%.
ft.com/content/868832…
African Swine Fever has already spread to every province just seven months after discovery. More than 30% of all pigs in China have been slaughtered prematurely to stem the outbreak of the disease.
vox.com/2019/6/6/18655…
Pork is an integral part of the Chinese diet, as the country consumes 28% of global production. @adamscrabble presents a great description of the lengths the Chinese are going to increase imports and the threat it poses to US national food security.
The last time food prices skyrocketed was in 2007, caused by breakdowns in global logistics, the result was a 2x price increase. Political instability devolved rapidly during this time and gave way to the #Arabspring a wave of protests and uprisings across the Arab world.
Tensions were already high in Egypt, Algeria, Syria, etc; Food inflation was a “threat multiplier” in that stoked tensions even higher and eventually provided the match to “highly flammable Tunisian” @davidbcollum
Just pausing here to rep my podcast, go check out the interview with David Collum, write of the quote above. My website is endofthehchain.com @endofthechain
endofthechain.com/david-collum-a…
Ag prices rose again in 2014 and another wave of uprisings occurred in Ukraine, the #euromaidan Several other protests occurred in Africa and Bosnia.
So what does this all mean? Well, one year of bad crops and 30% of the pigs in China isn’t enough of a threat to food prices this year. Next year is when the catalyst for prices to double or triple could occur if another poor crop is planted/harvested or if China can’t control.
Overall Inflation has been flat for the past decade. For all the Fed has done with QE and policy, the numbers are flat. All this could change if food prices increase. Avocados are the primary example of the threat to millennial toast, but what happens when the toast is price out?
Inflation might strike Trump/Powell in the face during an election year, stoking political tensions even further. As a trader I make money either way, however as an individual I worry that a coming food shortage might threaten the fabric of US/global democracy and stability.
Restaurants are one of the industries most at risk. This sector has grown 2x in last decade and 3x since 1990. A third of Americans eat out daily. What happens when their Big Mac doubles in price?
Protests, revolutions and deaths resulting from them are not conducive to market stability and growth. Our way of life is precariously in the balance and next year will determine if #inflation strikes back.
Next time you see a farmer, thank them for the work they do. It's an extremely hard profession with brutal margins. Their service ensures the modern economy ticks onwards and we don't all eat each other.
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