what is meant by rationing demand

[just_wondering]

From Kostals news letter

This Agricultural commodity bull is for real where arguably a trend
global yield outcome in coming year is insufficient. Either an above
average yield outcome is needed or demand rationing is at risk of occurring
in at least 1 major commodity. The Asian food demand bull is not about to
derail anytime soon (most important consideration that is typically least
understood and under-rated) and one cannot expect supply replenishment to
extreme tight stocks in one year.

[Fransisco]

I think what he means is that the price will have to rise to the point were buyers will start to look for other cheaper products to use.

[tower]

i believe that this is a sure sign that that great communicator and memorable conservative Ronnie Reagan had some sort of inkling when he talked about the revolution of reduced expectations.

Demand rationing means that people are going to get hungrier and that is more likely to happen than there is going to be a large crop to offset world shortages.

It's my bet that governments around the world, committed to maintaining cheap food so that economies built on buying into the information age and wasteful consumerism can continue on for a while at least. There will be a lot of pressure exerted the other way of course as well as fuel for the green revolution gets more expensive.

[chaffmeister]

I know Kostal. You can sure that he's not referring to Ronnie Reagan or wasteful consumerism or the green revolution.

Fransciso got it right: the job of the market is to find a price that will clear excess stocks (entice price elastic buyers) in times of excess and <b>ration demand</b> (entice buyers to find cheaper substitutes or otherwise reduce demand) in times of tight supplies.

[winwin]

Rationing demand is one EG of a market working as it should.Price up;demand down.
The cwb idea was to ration sales,and ration farmers using our cwb ration book.
Of course this simply has,every year since its creation,built up stocks in the westeern farners bins and DRIVEN DOWN PRICES HERE.
Exactly what happened aug 1;CWB ordered exports illegal.Prices drop.
Hurts us.Pretty stupid thing to do to yourself

[Fransisco]

I guess the opposite would be 'rationing supply'. At times of surplus product the price has to drop to the point were people start growing something else.

The key market mechanism is price. The market determines what the appropriate price is depending on the combination of supply and demand.

And it does it so much better than any central planner ever could.

[tower]

I think that farmers buying into the competitive nature of the marketplace has produced more glut on the market and meant that prices have been low for the last thirty years, forcing more per acre production. This relies of course on cheap energy to grow the grain, and energy is getting more expensive.

The market does work in this case, as weather gets more erratic and troublesome for agriculture, farm expenses continue to rise, farmers learn from the past and quit producing more than the market will bear, and production drops off those people who are already hungry will look, as chaffmeister suggests, for cheaper alternatives or will lower their demand for food. That's gotta be a good thing eh?

[charliep]

Greg Kostal is a former co-worker/friend.

My interpretation is that farmers can look forward to 2 to 3 years of above average prices. In a world of tighter carryovers/just in time shipping, a balance has to be achieved between what is being produced and consumed. If you look at trends in supply demand tables, the world has been consuming more than it has been producing for several years. This is further magnified by a bio fuel industry that is driven by politics/subsidies. The markets function medium to long term has to be to encourage production. This brings in regional competitiveness issues and where the market signals for this production increase will occur.

[parsley]

Comments from an European maltster I correspond with:

"In a "normal" year, whatever that is, China imports around 1.2-1.4 million tonnes of malting barley. Australia usually supplies about 80%, although with crop failure in the last 2 years, they have not been able to send the usual volumes (over 1 million tonnes).

In such years, Chinese buyers has been present in Canada and EU looking for additional cargoes, which has an inflationary effect on price when we are in a short market too.

Also, since the price of malting barley has risen so much, the Chinese brewing companies have significantly reduced the malt content in their beers, using more local adjunct.

After all, the most important thing for beer sales in China is cost of product to market (ie, cheapness/affordability to the local consumer). To achieve this, cost of raw material is critical.

On average, across the world, a brewery uses about 14kgs of malt per hectolitre of beer. The Chinese have already moved down to 9kgs/hl, and will go down further if raw material costs remain at this high. I can't vouch for the quality of the beer, but it will be alcoholic and it will be affordable to the average Chinese.

The Chinese are also growing more malting barley of their own. One of the major regions that has been allocated land for malting barley is up in Mongolia. It works, but the logistics make it difficult. Mongolia is a long way from the main beer production regions of Beijing, Shanghai, Tsingtao, Guanzghou to Hong Kong (the affluent south east coast of China). The barley has to be moved a very long way.

I am told that if every Chinese person ate one extra egg a day, there would not be enough maize in the world to feed all those chickens required to produce this extra number of eggs"

Unquote


Parsley

[just_wondering]

Thanks everybody
On the point of substitutions most everybody knows the numbers .08 cents worth of corn in a box of green chicken (what my three year old used to call corn flakes) 1/2 cent barley in a bottle of beer. And all the money lost in the supply chain. At what point do end users push the costs up to the consumer.
For example last year frozen orange juice was .79cents this yesterday at the local co-op it was on special 2/$3.00 I have some vague remembrance of a early frost in Cali.
I guess what my point is people can pay more for food how do I get more of that $$$
BTW I started the thread I can take it off topic. or is that bad chat room etiquette?