Salient to Investors:
Stockpiles of the biggest crops will decline for a third year on drought in three continents.
U.S. crops are in the worst condition since 1988, heat waves are battering European crops and India’s monsoon rainfall is 20 percent below normal.
Goldman Sachs, Macquarie Group and Credit Suisse say crops will continue to be the best-performing commodities this year.
The U.S. drought in June was the widest since December 1956, while the past 12 months were the hottest on record.
U.S. nuclear plants’ output on July 27 was the lowest for the day since 2001 because water was too hot to be an effective coolant.
Global food prices are still 10 percent below the record reached in February 2011.
Barclays is “modestly overweight” in grains and soybeans, but recommended investors reduce bullish bets as improving weather, declining demand or an easing of U.S. requirements for ethanol in gasoline may send prices lower
Goldman predicted $9 corn, $20 soybeans, $9.80 wheat in three months.
Danske Bank predicts global food prices will jump 25 percent this year .
Gates Foundation says U.S. households spend 6 percent of their total expenditures on food versus 35 percent in India and 45 percent in Kenya. The USDA says with less than 5 percent of the world population, the U.S. consumes 31 percent of global corn production, 18 percent of soybeans, 32 percent of cheese and 20 percent of beef and veal.
The National Intelligence Council says nations reliant on food imports, including Egypt, Pakistan, Bangladesh and Sudan, are especially vulnerable to unrest. More than 60 food riots erupted worldwide from 2007 to 2009 as prices surged, the U.S. State Department estimates, while the U.N. says production will need to expand 70 percent by 2050 as 2 billion people are added to the population.
Professor Tim Hagle at the University of Iowa says retail-food costs keeps the economy in a fragile position, the big issue in this election.
Steve Hatz at Bank of the West said U.S. farmers are less likely to feel the pinch because about 85 percent of crops are insured.
Ron Plain at the University of Missouri said livestock ranchers lost $260 a head in June versus a $156 loss a year earlier.
Steve Shafer at Covenant Global Investors said global beef inventories are dropping in part because rising incomes in emerging markets mean consumers want to eat more meat, causing a rising supply/demand imbalance.