Farm-Credit Squeeze May Cut Crops, Spur Food Crisis

This may be one of the worst time to write about commodity. I'm going to write anyway. The world already short of inventory as I have written about this a few times. For new readers, you may click one of my old post (here)

Harder credit to come by may cut crops and essentially drive up soft commodities. Jim Rogers has been repeatably saying he is buying agricultures.

Bloomberg written a piece about 3 weeks ago on impact of credit squeeze.(click here) Key points:

1. Oct. 27 (Bloomberg) -- The credit crunch is compounding a profit squeeze for farmers that may curb global harvests and worsen a food crisis for developing countries.

Global production of wheat, the most-consumed food crop, may drop 4.4 percent next year, said Dan Basse, president of AgResource Co. in Chicago, who has advised farmers, food companies and investors for 29 years. Harvests of corn and soybeans also are likely to fall, Basse said.

Smaller crops risk reviving prices of farm commodities that sank from records in 2008 after a six-year rally that spurred inflation and sparked riots from Asia to the Caribbean. Futures contracts on the Chicago Board of Trade show wheat will jump 16 percent by the end of 2009, corn will rise 15 percent and soybeans will gain 3 percent.

2. In Brazil, the world's third-biggest exporter of corn after the U.S. and Argentina, production may fall more than 20 percent because farmers can't get loans to buy fertilizer, said Enori Barbieri, a National Corn Producers Association vice president. The nation's coffee harvest, the world's largest, may drop 25 percent for the same reason, said Lucio Araujo, commercial director at farmer cooperative Cooxupe, located in Guaxupe.


3. Global inventories of corn, wheat and soybeans before the harvest in the Northern Hemisphere next year will be the second- lowest since 1974, enough for 67 days of consumption, compared with 144 days of supplies in 1986, U.S. data show.

Plantation stocks will be back in fashion in 2009.