I listened to a very interesting presentation a few months ago by Evelyn Browning, a climatologist. She said the world was exiting a 40 year period of the most mild weather known in the last 1100 years judging by tree rings. With increasing sunspot activity on the rise, record warm Atlantic and Pacific ocean temperatures and a change in the Pacific Decadal Oscillation we have now entered what is historically a more normal but actually more violent and extreme weather regime which will probably last for at least 20 or 30 years. Certainly this year's droughts and floods, following so shortly on the heels of worldwide floods and droughts in '07 and '08 appear to validate her ominous predictions. When I got into the grain business in 1973, every four to five years for the next 15 years, we had a good old-fashioned drought in the Midwest. The last one was in 1988. Will it take another 1988 before we stop this ethanol madness? Consider that ethanol uses about as much energy as it provides, if you count all the transportation costs starting with imported fertilizer, of which we imported 11 million tons in 2009. Self sufficiency through ethanol? You betcha! Ethanol is nothing more than a giant subsidy to big agribusiness and another Washington boondoggle. It is very much like the USDA pushing saturated fat down our throats for our good health. It may make us feel good but it isn't doing any good.

David Fuller's view Evelyn Browning Garriss, referred to above, produces the Browning Newsletter on climate conditions, published by Fraser Management Associates. It is a fascinating read.


Veteran subscribers may recall John Macintosh's earlier forecasts on corn, soybeans and wheat, which have been very accurate over the years. He is a diligent researcher, willing to say exactly what he thinks. If you know the research industry, you will know that few analysts have that freedom. John's occasional letters, which Fullermoney is delighted to post, are produced only when he has something really important to say.

The situation outlined by John Macintosh in his succinct report remains a medium-term opportunity. I also find it alarming, as mentioned previously, because there is a real risk of some serious food price inflation. And it is not just food prices that are rising. All agricultural commodities have been affected by adverse weather conditions since June. Additionally, prices of most industrial commodities were already strong and remain so.

One can never be certain about markets which are driven by sentiment in the short to medium term, but logically, government bond yields should be most adversely affected by commodity price inflation. Higher commodity prices on an orderly basis are mostly good for stock markets, not least commodity shares. However, soaring commodity prices would become a headwind for global equities. Another big spike in the price of crude oil would be outright bearish, and likely to tip the US economy into the double-dip recession which has been avoided so far.

Lastly, returning to my comment about a medium-term opportunity in agricultural commodity markets, I do not want to create the impression that Fullermoney is becoming more bullish as prices rise. The base formations were evident much earlier in the year. Adverse weather conditions in many agricultural regions have given us the main reason why price trends are fulfilling the potential indicated by those bases. Weather conditions appear to remain adverse but have always improved in the past. Consequently, it would be premature, to put it mildly, to conclude that they will not become more favourable in the medium-term future. Meanwhile, rising prices take cyclical markets closer to their next peaks.