The Uptrend in this Grain Returns to a Yearly High
Today’s chart shows how it’s “boom times in Iowa”… And our warning to dictators still stands.
Several times this year, we’ve highlighted how one of the great fears of the world’s dictators is a big spike in food prices. The average Joe – whether he lives in Madrid, Miami, Mumbai, or Mexico City – will march to war for the craziest reasons. He will endure punishing tax rates. He will #-ad_banner-#cheer on the dumbest government actions. But should his food become expensive, he’ll be rioting against the government tomorrow… alongside every one of his neighbors.
That’s why the giant rally in corn prices is a concern. The grain is a staple of the world’s food supply. For much of 2009 and 2010, corn traded in the $3.50 to $4 per bushel range. This was a “relatively cheap” level for corn. But bad weather, record-low inventories, rising ethanol usage, and booming demand from emerging markets (like China) have caused a 100%-plus surge in the yellow stuff… and severe August heat has made things worse.
As you can see from the one-year chart below, corn prices dipped in June. But the recent weather has pushed corn back near its yearly highs. This price action has farmers dancing in the streets… but will have others rioting in them.