Farm Credit Squeeze May Shrink Crops, Spur Prices, Create Food Crisis
Thursday, 30. October 2008, 03:42:12
Carlos Caminada, Shruti Singh and Jeff Wilson of Bloomberg report that the credit crunch is compounding a profit squeeze for farmers that may curb global harvests and worsen a food crisis for developing countries.
Global production of wheat, the most-consumed food crop, may drop 4.4 percent next year, said Dan Basse, president of AgResource Co. in Chicago, who has advised farmers, food companies and investors for 29 years.
Harvests of corn and soybeans also are likely to fall, Basse said. Smaller crops risk reviving prices of farm commodities that sank from records in 2008 after a six-year rally that spurred inflation and sparked riots from Asia to the Caribbean. Futures contracts on the Chicago Board of Trade show wheat will jump 16 percent by the end of 2009, corn will rise 15 percent and soybeans will gain 3 percent.
"The credit situation is worrying even the biggest and best farmers," said Brian Willot, 36, a former University of Missouri commodity analyst who now grows soybeans on 2,000 acres in Brazil. "For the financially weak, credit has dried up completely. For the strong, credit has been delayed and interest rates are higher."
In Brazil, the world's third-biggest exporter of corn after the U.S. and Argentina, production may fall more than 20 percent because farmers can't get loans to buy fertilizer, said Enori Barbieri, a National Corn Producers Association vice president. The nation's coffee harvest, the world's largest, may drop 25 percent for the same reason, said Lucio Araujo, commercial director at farmer cooperative Cooxupe, located in Guaxupe.
Borrowing costs increased and farmers struggled to get loans after the worst financial crisis since the Great Depression made banks and grain processors, including Cargill Inc. and Archer Daniels Midland Co., less tolerant of risk.
Minnetonka, Minnesota-based Cargill and Decatur, Illinois- based Archer Daniels, the world's largest grain processors, are among the crop buyers to halt financing for growers in Brazil, said Eduardo Dahe, who represents the companies as president of the National Association of Fertilizer Distributors.
Charts
Grains, JJG, rose 6% today and 9% for the week ... JJG has risen 9% so far this week
Commentary
There is coming a dramatic rise in the price of food.
While austrian economists, those of the Mises persuasion, continually pound their "deflationary price" drums, I am continually relating hyperinflationary pressures.
Global production of wheat, the most-consumed food crop, may drop 4.4 percent next year, said Dan Basse, president of AgResource Co. in Chicago, who has advised farmers, food companies and investors for 29 years.
Harvests of corn and soybeans also are likely to fall, Basse said. Smaller crops risk reviving prices of farm commodities that sank from records in 2008 after a six-year rally that spurred inflation and sparked riots from Asia to the Caribbean. Futures contracts on the Chicago Board of Trade show wheat will jump 16 percent by the end of 2009, corn will rise 15 percent and soybeans will gain 3 percent.
"The credit situation is worrying even the biggest and best farmers," said Brian Willot, 36, a former University of Missouri commodity analyst who now grows soybeans on 2,000 acres in Brazil. "For the financially weak, credit has dried up completely. For the strong, credit has been delayed and interest rates are higher."
In Brazil, the world's third-biggest exporter of corn after the U.S. and Argentina, production may fall more than 20 percent because farmers can't get loans to buy fertilizer, said Enori Barbieri, a National Corn Producers Association vice president. The nation's coffee harvest, the world's largest, may drop 25 percent for the same reason, said Lucio Araujo, commercial director at farmer cooperative Cooxupe, located in Guaxupe.
Borrowing costs increased and farmers struggled to get loans after the worst financial crisis since the Great Depression made banks and grain processors, including Cargill Inc. and Archer Daniels Midland Co., less tolerant of risk.
Minnetonka, Minnesota-based Cargill and Decatur, Illinois- based Archer Daniels, the world's largest grain processors, are among the crop buyers to halt financing for growers in Brazil, said Eduardo Dahe, who represents the companies as president of the National Association of Fertilizer Distributors.
Charts
Grains, JJG, rose 6% today and 9% for the week ... JJG has risen 9% so far this week
Commentary
There is coming a dramatic rise in the price of food.
While austrian economists, those of the Mises persuasion, continually pound their "deflationary price" drums, I am continually relating hyperinflationary pressures.
WIDGETIZE