Posted on 10/20/2012 6:16:26 AM PDT by TigerLikesRooster
By 2015 hard commodity prices will have collapsed
Posted by Michael on September 16, 2012 in Commodities
For the past two years, as regular readers know, I have been bearish on hard commodities. Prices may have dropped substantially from their peaks during this time, but I don’t think the bear market is over. I think we still have a very long way to go.
There are four reasons why I expect prices to drop a lot more. First, during the last decade commodity producers were caught by surprise by the surge in demand. Their belated response was to ramp up production dramatically, but since there is a long lead-time between intention and supply, for the next several years we will continue to experience rapid growth in supply. As an aside, in my many talks to different groups of investors and boards of directors it has been my impression that commodity producers have been the slowest at understanding the full implications of a Chinese rebalancing, and I would suggest that in many cases they still have not caught on.
Second, almost all the increase in demand in the past twenty years, which in practice occurred mostly in the past decade, can be explained as the consequence of the incredibly unbalanced growth process in China. But as even the most exuberant of China bulls now recognize, China’s economic growth is slowing and I expect it to decline a lot more in the next few years.
(Excerpt) Read more at mpettis.com ...
Oct. 1, 2010 to Oct. 1, 2011 we had 2-3/4” rainfall for 12 months. If there is a precedent to that it was in 1895. My ancestors had oral history of that one. They settled in this county in 1889.
Beginning in Mid Oct. 2011 we had normal rainfall until spring. Then we had a repeat of extreme hot temps and drought until about 1 month ago. Looks like an early fall and prospects of normal winter moisture. (impossible to predict for sure)
Cattle herds are very very low.
But what I described is in the Rolling Plains and the State of Texas is huge. Many areas are still deeply in the extreme drought category.
Cotton production was not good. Much of it will be shredded and not harvested. Wheat crop last year was about 1/2 normal production. Some producers harvested no none of their wheat. Looked like properly headed, but no grain inside. I think most of that was early 90 degree temperatures shutting down the plant growth. It was worst with early planted wheat.
I give plant breeders credit where it is due, but do not like the legal land mine field associated with seed licensing. We produce Certified and Registered wheat seed. My father has been doing that for many years and my brother and I just took over that part of the operation.
Farming was once a simple business, if you want to call it that. It is no longer. Most of the complexity, in my opinion, is due to lawyers and politicians and contributes little to production.
“Farming is easy if your plow is your pencil and the field is 1,000 miles away” ~Ike
Bartering grain for fuel is one thing,but what do I do when I need a new concave or rasp bars for my combine.Or new drive tires for my big John Deere tractor?
Besides,the government will come and steal all my stored grain in an emergency.
I put out that idea of bartering as a means to survive... no, it’s not a perfect way.
I know “wood” instead of food was a typo but it brought a few things flashing back into memory.
A couple of things most people living today don’t quite grasp is the degree of hunting for food that occurred during the Great Depression.
Wildlife numbers were seriously depressed even into my childhood in the late sixties and seventies. It was a fairly rare sight to see a deer even in rural North Carolina, to the point that a set of deer tracks was a noteworthy thing, talked about down at the country store.
So, any wildlife that can be hunted for food will rapidly be hunted down and numbers will fall precipitously, taking decades to recover after the emergency period of want has passed.
Second, the “wood” part ... have you looked hard at old Depression era photographs from the south and east? Even in the cities and towns, forestation was gone. Ornamental trees along city streets, in churchyards and such was all there was. Just cut over as far as the eye could see.
Cheap fuel for heating and cooking, I guess, plus cash strapped landowners selling it all to keep from losing it to the bank or a tax sale.
It will be an interesting clash between the government environmental regulations and raw, panicky need, should a full on collapse ever arise. Major soil erosion, possible Dustbowl II in some dryer areas.
I can see some good in undermining regard for overweening environmental regulation and restriction in the long term. In the near term it’d be like living on the face of the moon after a few years.
In the event of a currency/banking collapse I plan to hasten to the local restaurant supply where I will barter for a truckload of beans, rice, lard, flour, etc. I’ll bet the owner suddenly realizes he needs more arms and ammo.
Then I will have my employees re-package it in sizes from 1/4 lb. to 10 lb.
VOILA! The new currency of the People!
I’ve read that. I also disagree regarding commodity deflation. With all of the cash being essentially manufactured, the natural course for commodities and of course proxy money like gold & silver will be a price increase. I’m no expert though but I have been putting my money where my mouth is and slowly turning excess cash into gold and 90% silver.
Sounds like just about everyone I know.
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