Posted on 01/04/2011 2:53:42 PM PST by FromLori
“All these people who got MBAs made a mistake,” according to Jim Rogers, the commodities investor, at the Reuters Investment Outlook Summit last month.
“The City of London and Wall Street are not going to be great places to be in the next two or three decades. It’s going to be the people who produce real goods in charge – the farmers and the miners.”
With commodities up 42pc since the beginning of last year, according to a basket tracked by Reuters, his words certainly ring true for 2010. An array of metals from gold to copper have hit record highs, while palladium has doubled and silver is up 83pc.
Coal, potash and other mining companies have also been a key target of merger and acquisition activity.
We believe this isn’t just a short-term rally, and would argue that commodities will have another bull run this year, driven by fundamental demand from emerging economies – principally China.
(Excerpt) Read more at telegraph.co.uk ...
Not questioning or doubting any of your statements but why is it as you say, there is an excess of hogs, that the price at the market is rising. That’s opposite of the law of supply and demand.
I know according to your post that farmers aren’t getting the extra money. Where is it going? The price of fuel to transport all that meat? The retailers making more money?
There is an excess of pork in the sense that the profit margins for the producers are too small. It’s slowly being ‘corrected’, but with each producer making his own decision it may take some time. Everybody has a lot of fixed overhead, and so producing an extra 5% costs only the cost of production, and everyone in farming is an optomist about future prices. Knowing that, I don’t see production falling, except as those who are driven out of business don’t send hogs to market.
Then, those production facilities will be picked up by new optomistic owners, and we’ll see the cycle continue.
I buy pork chops now, I used to be a producer, and they are dirt cheap at the meat counter.
Transportation (fuel)costs are going to be a signifcant factor. It cost more to harvest the corn, more to haul it to the grain handling, more to truck hogs to market, ets, etc.
Not sure if the retailers are taking a bigger profit, but my sense is that they’re not.
That’s not a very concise answer, but I hope it helps.
An FYI: Food prices, as a percent of the average persons income, have fallen 40% in the last 40 years.
Eat up!
Pork-belly contracts have been traded on the Chicago Mercantile Exchange since 1961. But The Wall Street Journal reports the pork-belly market is in danger of becoming extinct. Last month, the exchange traded just six pork-belly contracts.
In case you're wondering, a pork-belly is the frozen slab of meat that bacon comes from. Farmers sell their pork bellies far in advance to lock in prices. So why is the pork-belly contract dying out? Well, it's not that we're giving up bacon. But now we eat it year-round so there is less need for futures contract.
Just read this and it may have something to do with the high price of bacon.
“Pork-Belly Market May Go Belly-Up”
http://www.freerepublic.com/focus/f-news/2651725/posts
you nailed it !
I need to correct my math mistake on the earlier post to you.
In 1970 food costs comprised about 14% of the typical families income, today it’s 10%.
That’s a 30% reduction in the last 40 years, not 40%.
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