Ian Mathias

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Food Costs Back on the Rise

Food costs have recovered very quickly, too. Exhibit A:

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According to The Economist’s Food Price Index, the global cost of food is down only 2.2% since the start of 2008… much better than most asset classes can claim.

“We have corn, wheat and beans in our sights,” reports our resource trader Alan Knuckman, “and hope for heavy profit taking to lock in the large recent price gains and allow us a better entry level.

“Because of the wetness, spring planting has not reached normal annual levels and supported grain prices at the beginning of the crop year. Spring wheat in North Dakota is typically above 96% planted as of last week, but only 60%-plus is in this year. Low carry-over from tight supplies is the underlying theme that makes the grains potentially explosive.

“Generally speaking, the asset market is entering another phase — after bottoming from an unnatural price depression of the vital resources that are consumed every day. This next step forward, as I see it, is a recovery as global demand rebounds and life continues on for the billions around the world who are not money managers, bankers or insurance executives mired by overleveraged portfolios and bad bets.

“Life goes on with, hopefully, a little less reckless abandon in the financial markets, with some lessons learned to prevent another push to the March stock market lows. People will continue to drive, heat, eat, produce goods/services and put the ‘consume’ in ‘consumer.’

“Conspicuous consumption may be out, but pent-up demand for goods we need has only been delayed.”

We couldn’t agree more…

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