2013: A Global Commodity Slump?

[errolanderson]

My concerns about commodity markets stem
from China.

The World Bank has forecast that China's
growth will slow to 5% by 2015. And
growth below 6.5% is effectively a
sunken economic ship for the Chinese . .
. they will again experience hard times.

And hard times for a communist country
mean lower food prices. In other words,
'deflation' is a risk.

To me, 20013, 2014 and 2015 may be (for
lack of better words)'a bag of crap' in
the commodity world. No doubt there will
be rallies, but given this global mess,
these rallies won't hold (IMO). Global
conflicts may offer temporary relief.

My apologies for being so opinionated,
but in my mushy brain this is as clear
as it gets . . . . If China goes down,
Vancouver and the rest of Western Canada
goes down. Our engine is directly
attached to their engine.

Then stir in a broken U.S. and Europe's
depression.

That's why I'm pounding the risk
management drums. Our markets now offer
solid opportunities, but the problem
with bull markets is that when they are
over; they are over very fast.

Errol

[hedgehog]

communist or not, low growth or not, the chinese need to eat.
they will buy what they need, otherwise a revolution will follow.
there is no real connection between growth and food consumption, it is inelastic, driven by supply(variable) and demand(rising).

[sumdumguy]

China and India have fueled this whole bubble.
Vancouver realtors are all shaking in their boots.
Canola has been a Cinderella crop but yellow
fields touching yellow fields may generate too
much disease to continue. Canola for fuel is not
sustainable.

Where are we going to make margin? Flax- how
much flax can be absorbed. agri-stabilty?
Keep paying the high cash rents, buy lots of
metal on credit. This pattern is just like the
governments

[bucket]

errol

So what is the answer?

Sell out to the highest bidder, send back the machinery and be unemployed in a couple of years because of a shitty economy?

Watch the money become worthless because the chinese farmers in canada need 1000 bucks for a loaf of bread?

[TOM4CWB]

Ado089,

We have been here farming in northern AB since 1881... and cashing 'chips' in; not in the rule book.

Interesting times... will be no doubt be coming our way!

Cheers!

[Hopperbin]

The World Bank has forecast that China's
growth will slow to 5% by 2015. And
growth below 6.5% is effectively a
sunken economic ship for the Chinese . .
. they will again experience hard times

I still don't get how growth like this durring these times and at the stage China is in is bad at all. Its normal they have to slow down. Everything is good. They are eating more meat that meat must be fed via soybeans. I think a lot of farm land investment companies will dissagree with Errol and I am inclined to side with them at the moment.

[Hopperbin]

Why is growth of below 6.5 percent a sunken ship for China? Does someone have research on this? Where is it? Any facts to prove this?

[Hopperbin]

Tom we are a lean bunch of farm operators, new investors don't even compare to us.

[oneoff]

Erroll....Don't worry about how your opinions play with the readers, or how far out in left or right field your many or few opinions may be seen to be coming from.

You will be proven right a few times; as will others.

And more often than not the sustantial market movers will never be consistently seen by anyone.

Nice thread and good to see sober thoughts from many contributors.

[vvalk]

Errol. You talk about the market tanking and am
curious what a farmer can really do about it. New
crop pricing is very cautious right now and
therefore prices are not very attractive. New crop
canola under $12 and low yielding spring wheat
maybe touching $8. At this point for planning 1
year out don't see as much downside compared
to prices rising to old crop levels. Especially since
the markets have already priced in a bumber S
America crop

[TOM4CWB]

oneoff,

Good Post.

Thanks Errol... I too like to stretch the corners of our minds... always good for us!

I really would like to know how much of this years crop has a home already. It will be VERY interesting to see what the CWB has attracted to their new Canola 2012 program.

I truly doubt the 20 percent of growers who grow 80 percent of the traditional CWB volumes... will send even 20 percent in the direction of the CWB.

We are charting 'new' paths here... no doubt!

Cheers!

[dave4441]

I dont think that too many people understand the fact that in many cases we are selling grain to very poor people. It is correct that people have to eat but if they have less money they eat less. HIgher grain prices in India has been shown to increase consumption of food because they are calorie defiecient most of the time to begin with. In 2007/08 people also had to eat but prices generally crashed because trade slowed due to lack of financing.