2011 INFLATION TAKING OFF FOR REAL: brace yourselves

“Dec. 27 (Bloomberg) — Corn may rise for a sixth straight week and soybeans may gain on speculation that hot, dry weather will damage crops in Brazil and Argentina, the two biggest exporters after the U.S.
Seventeen of 24 traders and analysts surveyed in the U.S. on Dec. 23 said corn will rise, and 19 of 25 respondents said soybeans will advance for the fifth time in six weeks. Last week, corn futures for March delivery climbed 2.9 percent to $6.14 a bushel on the Chicago Board of Trade. Soybean futures for March delivery rose 3.8 percent to $13.60 a bushel.”

In Colorado, lack of moisture is threatening wheat crops in what farmers have described as the worst they have seen in 30 years.

The Greeley Tribune
Farmers are survivors.
That’s why many will shrug off this year’s bad start to the winter wheat crop, still resting on the little bits of hope for moisture they keep alive.
“Now, it’s probably the worst we’ve seen in 30 years,” said Jim Cooksey of Cooksey Farms southeast of Roggen.
Four months of little to no moisture is taking its toll on the crop, which blankets fields across northern Colorado. That means hopes for even an average harvest next summer are starting to dwindle.

In London, wheat prices rose to match prices in France and United States. Dry weather in Argentina is also threatening corn and soybeans.
In Southern Florida, unusual freezing has destroyed many of the crops that were saved before the freeze that happened there two weeks ago. Governor Christ has extended his crop freeze emergency order.
The industry has already lost close to 273 million dollars since early Decemeber.

news-press.com
Whatever crops were salvaged following a freeze nearly two weeks ago, were done in by last night’s chilly temperatures, said Frank Oakes, the owner of Oakes Organic Farm and Food & Thought in Collier County.
“The frost this morning was thicker than I’ve seen it,” Oakes said after surveying his crops near the Corkscrew Swamp Sanctuary early this morning. “It looks like the ground is covered in snow.”

On December 28th, The New York Times published an article with the shocking title, “Global Food Prices in 2011 Face Perilous Rise.” The article explains how there is talk of a coming worldwide food crisis and that government must act to avoid a disaster.

New York Times
Food prices globally are rising to dangerous levels. There is talk of a coming crisis, like the ones that produced riots around the world in 2008 and 1974. Many of the ingredients of a disaster are present, but governments can stop the problem before it causes too much damage.
A warning sign is the price of traded staples like wheat, corn and rice. Prices shot up in 2010, soaring 26 percent from June to November and brushing the peaks of 2008, according to the Food Price Index kept by the Food and Agriculture Organization of the United Nations. That hits poor countries that import much of their food, including the Philippines, Mexico, Nigeria and Pakistan.

Floods have ravaged Queensland Australia and food prices are expected to rise by 50 percent. Upwards of 20% of crops have been destroyed.

Courier.com.au
The damage is likely to push up the cost of groceries including melons, tomatoes, mangoes, and bananas from Wednesday.
Affected farmers on Tuesday revealed both summer and winter crops had been destroyed, with many hectares of newly planted grains, vegetables and fruit submerged by flooding.
FOOD prices could rise as much as 50 per cent as the Queensland farming industry is hit with flooding losses of at least $400 million.

2011 – THE YEAR OF CATCH-22

As I began to think about what might happen in 2011, the classic Joseph Heller novel Catch 22 kept entering my mind. Am I sane for thinking such a thing, or am I so insane that asking this question proves that I’m too rational to even think such a thing?  In the novel, the “Catch 22″ is that “anyone who wants to get out of combat duty isn’t really crazy”. Hence, pilots who request a fitness evaluation are sane, and therefore must fly in combat. At the same time, if an evaluation is not requested by the pilot, he will never receive one (i.e. they can never be found “insane”), meaning he must also fly in combat. Therefore, Catch-22 ensures that no pilot can ever be grounded for being insane – even if he were. The absurdity is captured in this passage:
There was only one catch and that was Catch-22, which specified that a concern for one’s own safety in the face of dangers that were real and immediate was the process of a rational mind. Orr was crazy and could be grounded. All he had to do was ask; and as soon as he did, he would no longer be crazy and would have to fly more missions. Orr would be crazy to fly more missions and sane if he didn’t, but if he was sane, he had to fly them. If he flew them, he was crazy and didn’t have to; but if he didn’t want to, he was sane and had to. Yossarian was moved very deeply by the absolute simplicity of this clause of Catch-22 and let out a respectful whistle. “That’s some catch, that Catch-22,” he observed. “It’s the best there is,” Doc Daneeka agreed. - Catch 22 – Joseph Heller

The United States and its leaders are stuck in their own Catch 22. They need the economy to improve in order to generate jobs, but the economy can only improve if people have jobs. They need the economy to recover in order to improve our deficit situation, but if the economy really recovers long term interest rates will increase, further depressing the housing market and increasing the interest expense burden for the US, therefore increasing the deficit. A recovering economy would result in more production and consumption, which would result in more oil consumption driving the price above $100 per barrel, therefore depressing the economy. Americans must save for their retirements as 10,000 Baby Boomers turn 65 every day, but if the savings rate goes back to 10%, the economy will collapse due to lack of consumption.

Consumer expenditures account for 71% of GDP and need to revert back to 65% for the US to have a balanced sustainable economy, but a reduction in consumer spending will push the US back into recession, reducing tax revenues and increasing deficits. You can see why Catch 22 is the theme for 2011. 

foto TED SZUKALSKI

(read the rest of this excellent article at  THE BURNING PLATFORM)