Attempting to decipher the global picture regarding food prices, food inventories, and food production is not akin to navigating a labyrinth. A deluge of misleading propaganda and short-term ‘noise’ from the mainstream media means anyone attempting to decipher these parameters is likely to encounter a plethora of “dead-ends” and “wrong turns.”
Those following agricultural markets and agricultural prices have seen two, general trends emerging over the past decade: rapidly rising (nominal) prices and steadily falling inventories. This flies directly in the face of the most basic of all supply/demand fundamentals.
Yes, falling inventories are supposed to lead to rising prices. However, those rising prices are then supposed to naturally lead to both falling demand (because of higher prices) and rising supply (because of higher prices) – with the rebuilding of inventories an inevitable result.
Yet despite the largest price-spike in the price of agricultural commodities in 40 years, inventories remain depressed, and critical stock-to-use ratios remain close to multi-decade lows. So why has the global economy ceased to respond to basic supply/demand stimuli? Because our subsidy-saturated global agriculture model is so absurdly broken...
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