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Global Food Crisis, Time To Buy Rice Futures

Jack Barnes writes: The world is finally waking up to the fact that global grain prices are destined to head higher - much higher.

Nasty weather in key agricultural markets around the world has savaged the global grain crop, meaning worldwide supplies can't help but be squeezed. Australia, for instance, is experiencing additional flooding in areas that were already battered by the torrential rains of November, December and January.

And as if the supply-related increase in agricultural commodities wasn't enough, there's also the U.S. dollar - and the so-called "race to the bottom" - to contend with. Make no mistake: The endless devaluations in the greenback are having a worldwide impact on agricultural commodity prices. Since commodities are priced in dollars, these devaluations translate into higher prices for grains and other food-related commodities.

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Commodities Continue To Hit New Highs

by: Calafia Beach Pundit
February 10, 2011

The above charts represent the two major components of the CRB Spot Commodity Index. Commodity prices continue to head skyward across the board, with most commodities hitting new all-time highs.

Arab Light Crude, flirting with $100/bbl, is now clearly higher in real terms than it was in the early 1980s. At this level, further price increases should begin to curtail demand, while also stimulating new sources of supply. But we are still well below the levels that might provoke a significant slowdown in economic activity, thanks to technological advances and energy conservation efforts.

Rising commodity prices continue to attest to a) strong global demand, and b) speculative activity fueled by easy/cheap money. Commodities are becoming increasingly vulnerable to any sign that monetary policy may begin to reverse course and seek to push short-term interest rates higher. I don't think this is imminent, but it is the clearest source of risk for commodity investors.