The dollar may be falling… but the price of wheat is soaring…
“Wheat prices have gone up like a rocket,” said a farmer in France. “We used to sell it for less than 100 euros a tonne. That was just a few months ago. Now, it’s selling for 260 euros a tonne.
“I think the whole world is changing. You know, agriculture has suffered for many, many years. Who wants to be a farmer anymore? You have to work hard… and you have to risk your money… and sometimes you don’t even earn enough to live on. And here in France, maybe it is the same in the United States, I don’t know, you also have to put up with so much paperwork… environmental protections… employment rules. I work in the field all week. Then, on the weekend, I have to work in my office to keep up with the paperwork.
“But maybe our time is coming at last. Now, the Chinese need food. And they don’t have that much good land to grow it on. They have to get it from us. And everyone wants quality food. And you can’t just produce quality food overnight. It takes many years of careful preparation … especially if you’re raising animals.
“And they’re taking a lot of land out of food production in order to use it to produce fuel. It is probably crazy, because it is a negative- sum operation in terms of energy, but it is a fact. I take two things as given – that the price of fuel will continue to go up… and the price of food will go up.
“You know, in Argentina, they’re moving the cattle to more and more marginal land – in order to switch to growing cereals. Because they can make a lot more money a lot faster by growing grains. It’s easy to make the switch too. Then, when the price of cereals declines, they’ll want to switch back… but it’s hard to go in the other direction. You can add to the world’s grain supply pretty fast. But you can’t add to the world’s beef supply fast… at least not quality beef. It takes time to build up a herd… before you can begin selling in any quantity. That’s why I think I’m better off sticking with cows. They’re not as profitable as grains now, but as these Chinese people get more of a taste for meat… and the quality of Argentine beef goes down… they’re going to want our good French meat.”
We agree… people will always need to eat… and grains (and grain-fed animals) are more in demand than ever before in the Far East.
That’s why we tend to believe that this commodities boom is far from over – it may just be starting.
Markets and Money