Taps Coogan – May 21st, 2021

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As readers of The Sounding Line are likely aware, the prices of agricultural commodities have been surging to multi-year highs since the outbreak of the Covid Pandemic. Corn prices are up over 100% over the past 12 months, soybeans are up 81%, sugar is up 52%, wheat is up 31%, etc…, and that’s after a considerable pullback over the past month.

The reasons behind the surge in food prices are numerous. Covid disrupted supply chains, shipping, changed eating habits, and limited farms’ ability’s to hire migrant workers. The Fed’s pro-inflation policies have also pushed down US dollar exchange rates and reduced it’s purchasing power.

On top of all of those factors, China suffered an outbreak of African Swine Flu starting in 2018, leading to the culling of roughly half of China’s hogs. While the outbreak is stilling stalking China and its neighbors, they are trying to rebuild their pork industry, spiking demand for feed grains. Then there is the Fall Armyworm outbreak that had started sweeping Asia, eating up enormous swaths of crops as it goes.

At the same time, Chinese consumers’ appetite for meat continues to grow, adding to their demand for animal feed.

All of this has pushed China’s agricultural imports through the roof, as the following chart from Statista reveals, and led Chinese authorities to try and bolster national stockpiles at a time of limited supplies, echoing the ‘Great Soviet Grain Robbery‘ that foreshadowed the rising inflation of the 1970s.

Source

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