LA

Not All Commodities Are Created Equal: A Look At Agriculture

Richard,
Thank you for your comments. You are absolutely correct in pointing out the importance of current stockpile levels. I have gathered the following data: At the end of 1999 the world grain reserves covered 119 days of consumption. Today, we are looking at 50 days for corn and 70 days for wheat. During the period 2000-2005 cereal reserves covered 18 weeks on average. Today we are at 12 weeks, with corn at 8 weeks. The most striking aspect of these numbers is, in my opinion, the velocity at which reserves are contracting despite slightly increase in production.
As far as the relationship between foodstuff prices and commodity prices, it was my intention to point out that the correlation is less intuitive than one may expect due to a variety of factors, such as labor and transportation costs. Thus, commodity prices are not always a satisfactory leading indicator of where Food CPI inflation is headed.