The relentless rally in grain prices is the result of shrinking global supplies that might not be replaced until late 2022 – or beyond
Supplies of three of the world’s most important grains: corn, soybeans, and wheat, are shrinking, and it will likely take at least the next two growing seasons for supplies to reach comfortable levels again. That’s the prediction the USDA and many private grain analysts have come to in recent weeks, and grain markets have taken notice.
At this point, most people don’t even know about the absolutely devastating crop failure that happened in China last year…
As the global population and economy grows, so too does the use of grains. Hence, any significant supply disruption can have an outsized impact on global grain prices, which is what happened last year when China had a crop failure.
The true extent of China’s 2020 grain production problems may never be known or recognized by official sources, but that doesn’t matter. Markets can see two things that really do matter: the price of grains in China and the amount of grains China imports. Those two inputs have created a bullish formula: Chinese grain prices, particularly corn prices, rocketed last year and remain at elevated levels, and China will import record amounts of soybeans and corn this year. The verdict is still out on Chinese wheat imports, but they are likely to be record high too – Chinese wheat imports are officially already at their second highest level in history.
Sadly, drought is also having a dramatic impact on agricultural production in Argentina and Paraguay…
The drought is also affecting neighboring Argentina and Paraguay. River levels are quickly dropping, forcing barges, carrying farm goods to reduce capacities to avoid grounding. These lighter barge loads have decreased the flow of corn, soybeans, soybean meal, and soybean oil to key export locations.
As global food supplies get tighter and tighter, hunger is starting to spread like wildfire…
The 2021 Global Report on Food Crises (GRFC 2021) highlights the remarkably high severity and numbers of people in Crisis or worse (IPC/CH Phase 3 or above) or equivalent in 55 countries/territories, driven by persistent conflict, pre-existing and COVID-19-related economic shocks, and weather extremes. The number identified in the 2021 edition is the highest in the report’s five-year existence.
While conflict continues to displace people, disrupt livelihoods and damage economies, the COVID-19 pandemic and related containment measures have exacerbated pre-existing drivers of fragility, widened inequalities and exposed structural vulnerabilities of local and global food systems, hitting the most economically vulnerable households particularly hard.
For the next several years, we are being told to expect rampant inflation, severe shortages and widespread hunger.
The corporate media is trying to make us feel better by assuring us that things will begin to turn around in 2022 or 2023, but they don’t really know what the future holds.
But one thing we know for sure is that global supply chains are in a state of utter chaos right now, and that is starting to cause great distress in every corner of the globe.
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