Tuesday, November 20, 2007

Risk: Food for Thought (Literally)

Purdue Outlook: Crop Markets To Remain Unsettled
Sustained weakness in corn, soybean, and wheat prices is not expected in the near term as supplies remain tight and demand is firm. Tight world stocks will continue to magnify the impact of production uncertainty into the foreseeable future. Volatility in energy and currency markets will also add to the volatility of crop prices. Risk has increased significantly.

Chinese demand extends soybean rally
U.S. exporters reported sales of 1.296 million tons last week, twice as much as a week earlier and the highest weekly sales since the marketing year began Sept. 1, the U.S. Department of Agriculture said Friday. China, the biggest importer, accounted for 71 percent of the total the previous week, plus a new sale of 226,000 tons reported Friday.

Food prices said to pose biggest risk to Chinese economy
Forget the focus on China’s currency, inflation and rising food prices is the most important element in its economy right now.

China pays price for ignoring prophet
With pork an important part of the Chinese diet, its price is a key marker in the general public's perception of inflation. ''I cannot afford to eat pork in this Year of the Pig'' is a topical local joke - and not necessarily a funny one.

Putting the reins on Asian inflation
"Food is still the primary force driving prices upward, although in a poor country where one-third of the CPI basket is food, I would think that rising food prices must affect wages and, through wages, the rest of the economy," said Michael Pettis, a finance professor at Peking University.

The same goes for higher oil prices, which can only be dismissed for so long. When crude oil hit $50 a barrel, analysts told investors not to worry. Similar noises are being heard as oil approaches $100 a barrel. How much longer can economists and investors live in denial that commodity prices will eventually filter into economies?

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