Money supply expansion is like roaches. It goes everywhere you don't want, and nobody can control it.
Plotted here is the money supply to futures ratio of soy, wheat, corn, and sugar. We have the potential to see a massive increase in food speculation, simply because it's not risky. When equities burst, the money goes anywhere it can. So we should expect a breakout here unless the fake money kicks back into gear.
Fake money WILL kick back into gear (either publicly or through some shady means) but food price will keep going higher because the gig is up.
fringe_chartist
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@lollerfirst, hey, thanks for the comment! I didn't get a TV notification for some reason. I think you are absolutely right. It seems like they are about a year late in their own policy alchemy, but for some reason, it's only surprising to the policy makers themselves. There's so much callousness and disregard for the public it's crazy. I mean cmon, a +0.1% fed funds rate change? After a 8% fake inflation reading? Historic charts seem to tell us that they would need to raise interest rates to equal or exceed the inflation rate, at minimum, to truly combat inflation, like in the 1970s. Seems like their rates by off by a multiple of 40 and it's sad to say, but I think this is a dis service to the public that will backfire horribly.
lollerfirst
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@a83hj9jago8w4gb2gvbczxjn35, it's already backfiring it seems
harun1087824
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@fringe_chartist, Hey, is there a discord chat to discuss these types of scenarios?
With the food decreased in Ukraine do see wheat and corn going higher in the short term. I haven't studied the growth cycle of AG to know when we get data to decide to go bigger into WEAT and CORN calls.
fringe_chartist
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@Racegirl, hey, thanks for your comment. Definitely! When I made this idea it wasn't with Ukraine in mind, it was purely from a technical perspective. I haven't really studied the sector to have much of a fundamental background. Relative to the money supply, food is extremely cheap was the theme for the chart.
But since then it's not looking good for food prices. It's estimated that 50% (!!) of overall fertilizer comes from Ukraine and Russia. This is a huge blow to the bottom line of the food industry and unfortunately means the higher cost of fertilizer is ultimately hoisted on the price-flexible consumer. For people that aren't so price flexible, they will be forced to switch to cheaper foods, which means overall fundamental habit changes and market changes. Overall food price increases.
Not to mention the huge supply of sunflower oil and seeds, plus wheat and corn that comes from this region. Ultimately I have a hard time believing that the global market is efficient enough to price this all in when such a huge shift is taking place. It's planting season in Ukraine right now, but it looks like they won't have much of a crop this year if at all. And nothing will be exported for the foreseeable future. So I think it might take a year or more at least, to truly see the effects of the Ukraine situation.
It's weird going to the store and thinking, "wow, those bags of dried beans seem like just about as good of an investment, if not better, than most stocks or commodities right now." but it's true. Crazy times.
Racegirl
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@fringe_chartist, Thank you for the insight! It might actually be good for us to have less wheat! Doctors might need to become wheat farmers to keep their day jobs! All kidding aside I think it hits the countries the hardest that actually are already starving. I doubt many Americans will die of starvation anytime soon. The fertilizers have gone bananas! We have stayed pretty high without major drops in WEAT so I'm waiting for a reentry! I need to dig into the seasonality of the commodities to see if in 2014 when Russia attacked Crimea (on a much smaller scale) if wheat fluctuated. I don't think the market has priced in so many geo and eco events! The slower the crash the more unhealthy it is to retail. I stooped buying dips and losing money to buying puts on the rips. The oil, gas and food stocks are probably going higher, but I hate buying anything to hold without some type of compitulation selloff. I just hold Butterflies and a few vertices. After reading a few BTC charts on here, I might buy more puts on BITO and MSTR on Monday if BTC doesn't have some crazy selloff this weekend.
fringe_chartist
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@Racegirl, lol, personally I think the world is a bit too hooked on carbs in general, especially refined carbs which are "enriched", which essentially remove all vitamins so the stuff doesn't rot, and add back in thiamine mononitrate so people don't get rickets. Remove a lot, add one thing back in. Unfortunately this means that if your diet is mostly cheap pasta or rice as in many poor countries, there's a severe lack of nutrients in there and a high chance of diabetes over time if your diet consists mostly of carbs. Not great when the world has such a high rate of diabetes.
I was messing around with this chart last night after not looking at it for a while, and found something interesting. It's hard to paint an interesting picture with a chart only going back to 2003, so I removed sugar, which isn't really food per se. Try it yourself with this symbol:
It's even more clear when you remove the price line and just look at the averages:
We're establishing some sort of breakout, but it appears we could hit the upper end of the breakout soon. Momentum is strong though, so maybe it will tick higher, but historically it seems unreasonable to expect it to go extraordinarily higher as we saw a huge pullback in 1991 and 2005. It wouldn't surprise me if this chart reached 0.5 to 0.6 eventually though.
Hard to know for sure, but something to keep in mind. Hope that helps a bit and take care :)