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Aug 9, 2012

Footstep of Food Crisis (Mr. K’s Course of Lectures on Finance)

The warning in this article is just what I had a talk with my wife about.
To sum up,

“Money being invested in government bonds will flow into the grain market someday.  At that time terrifying inflation (or stagflation) will break out.  However much money you may have, it is useless because there is no grain itself.  We will see unimaginable tragedy.  However, it is much better than a third world war.  I think that humanity would learn to take good care of nature for the first time after experiencing such tragedy.”

Please brace yourself.
Masatoshi Takeshita

Picture: Wikimedia

English translation of an excerpt of a Japanese article: “Super professional” Mr. K’s Course of Lectures on Finance – July 2012 –    Yukio Funai.com July 2012


“We need two earths by 2030,” World Wildlife Fund (WWF) gave a warning.
According to it, people all over the world spend their life as a consumer, 50 percent above the limit the earth environment can continuously support.
It is no exaggeration to say that the earth keeps running toward a danger zone.  The current abnormal weather makes us feel that “the living earth” is giving a scream to humanity.

Food Crisis Is Steadily Approaching!?

However, people all over the world pay no attention to such warning and every country goes all out day and night to improve their own peoples’ lives.  The claim of “Lower your standard of living not to destroy environment” cannot be shared by people.  Unless we were hit with “fateful tragedy”, humanity as a whole would never be able to share the consciousness of “environmental conservation.”
And this “fateful tragedy” seems to be steadily approaching.

Capital markets are daily and hourly changing.   Especially in the grain market we see a big magmatic activity of change.

There are major crops in the world: rice, wheat and corns, whose production amounts to approximately 0.6 billion tons per year.  Included soybeans, it amounts to 2 billion tons.  These occupy almost half of the whole food production in the world.

In fact, these four major crops are the key for world food supply.
And now, except for rice, the prices of wheat, corn and soybean grains never stop skyrocketing.

Surprisingly, one bushel of corn and soybeans is priced 8 dollars and 17 dollars, respectively.  Ten years ago, it was common knowledge that the former was priced 2 dollars and the latter 5dollars.

This sharp rise in prices is never due to speculation in futures but is caused by complete shortage of supply.   Further rise in prices is predicted and how it will affect the world is still unknown.

At present, the world has not yet given a scream for these skyrocketing prices of crops just because the effects have not yet reached the world due to time lag.

Abnormal Weather Experienced In The World

Drought in the U.S. is not the only global abnormal weather.  Naturally, abnormal weather has incessantly caused great damage to global farming.

Surprisingly, yield of wheat in Russia expected to have a rich harvest has decreased by 20 percent due to drought.  Although it is the season of monsoon now in India, it never rains.  Sugar canes have a bad harvest and the price of sugar is rising.  On the other hand, in Brazil, a spell of heavy rain has prevented coffee farmers from gathering it.  Such damage causes the coffee price to be on the rise.  In northern parts of Europe it has incessantly have heavy rain.  In England, Sweden and Ireland it had record-high rainfalls in June.  This has caused great damage to barley beer is made from.  On the other hand, heat waves hit the southern part of Europe.  In the grain belt of Eastern Italy, Black Sea and Ukraine, abnormal high temperature, which was more than 35°C in average temperature, five degrees higher than the average year, also has caused great damage to wheat and corns.

The problem is that abnormal weather phenomena started occurriing only one and a half months ago.  At that time, heat waves or droughts seen now were not predicted at all.

Inventor Jim Rogers predicts that the time will come when agricultural workers drive luxury cars.  He gives a warning that the world will face incredibly serious food shortage.

“The government should issue government bonds and loose monetary controls!”  The way to get out of recession is the same in the world.  There is a big chorus that the government should fight deflation by means of increasing the national debt and printing money.

At present, money with no investment destination is swarming into government bonds of Japan, U.S. and Germany considered as safe assets.  It is a great surprise that money is invested in government bonds in the face of negative interest rate.

Market price is very changeable.  What will happen if after a change in market tide, a vast amount of funds flows to the grain market, seeking profit?   True inflation breaks out at the time of supply shortage.  Corns and soybeans in stock are decreasing at an incredible speed.  The stocks are available only for one month.  I wonder what will happen in the future.

Japan ranks the world’s largest corn importer and depends almost on the U.S.  As an overall percentage of imports, importation of corns from U.S. accounts for 90 percent and that of soybeans 66 percent.

We are approaching the end of the age of plentiful food we are living in.  The period of time during which we can ignore food shortage with a cool face because we have enough stocks of surplus rice, will not last so long.  It is not until surging food prices bring a panic that people realize what actually has happened and how grave impact it will have on them.

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