Eoin Treacy's view For months Fullermoney has talked about the very large base formations in this crucial sector in terms of world food supplies. Prices are beginning to trend as you can see from these weekly charts for wheat (the leader, which appears to be completing a consolidation) corn, soybeans and oats. Rough rice has the atypical pattern but should have some catch-up potential.

The key variable is always going to be weather during the growing seasons and this really is shaping up as a perfect storm. You know about Russia's drought which devastated its spring wheat crop, leading to an export ban. Our grain specialist subscriber says that Russia's winter wheat planting is in trouble due to continued drought, hard land and approaching cold weather.


He says the US corn crop is much worse that the USDA is currently forecasting. While the crop looked very good through a wet June, July and early August, night time temperatures in the latter month were too hot. Corn bulks up its kernels during nights. However if it is too hot the sugars which fatten the kernels do not move up the stalk. Heat has also led to a too rapid ripening of the crop.


China's corn crop was adversely affected by drought and the country has been a heavy importer this year. It may want to import more than the USA will be able to supply.


We already knew the severity of Pakistan's food crisis as flooding has wiped out new crops and also destroyed a portion of the stored crop reserves. Who will feed Pakistan? Probably not India which has suffered this year from commodity price inflation due to last year's bad monsoon. Additionally, the latest reports indicate that current monsoon has not been as favourable in some states as previously forecast.

Our grain and bean specialist thinks that wheat prices could spike to $15 over the next six months and corn to at least $7. If so, the world will face a sharp bout of food price inflation, as we last saw in 2008. If even remotely correct, that might cause Asian countries to push short-term interest rates higher, strengthening their currencies and possibly creating a headwind for their stock markets. Stagflation in the USA and parts of Europe would come as a shock to bond buyers, who see only deflation today, pushing up yields in the process.