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Tim Odd

Opinion: System that keeps dairy prices high needs adjustment - 0 views

www.montrealgazette.com/...story.html

Soft Commodities Government Intervention Canada Dairy

shared by Tim Odd on 20 May 13 - No Cached
  • Supply management, Canada’s production-quota system for dairy and other commodities, was established more than 50 years ago to balance supply and domestic demand for dairy products. Under this system there are prohibitive tariffs, coupled with quotas, on dairy products imported from other countries.
    • Tim Odd
      Tim Odd on 21 May 13
       
      A command-and-control system of government intervention.
  • Canada is trying to close deals with the European Union while reaching out to the ever-growing Asia-Pacific market by engaging with the trans-Pacific Partnership. But Canada’s continuing attempt to have it both ways — demanding greater access to other markets while essentially prohibiting access to our market for some commodities, like dairy — has undermined our moral authority abroad when it comes to negotiating trade deals.
  • Our demographic situation has made growth of domestic dairy sales impossible. Milk consumption per capita in Canada is at an all-time low, and dairy farms are disappearing despite our protectionist policies. In 1971, when supply management in dairy went into effect, there were 122,000 dairy farms in Canada. Today there are fewer than 13,000. A demand-focused approach to dairy products is needed. Supply management has played an important role for our agricultural economy, but those days are long gone.
    • Tim Odd
      Tim Odd on 21 May 13
       
      The command-and-control approach the government has taken has failed miserably, and a market-based approach should be tried instead.
  • Tim Odd on 20 May 13
     
    "Supply Management" is Canada's quota system for dairy & related commodities. Supply management imposes a series of tariffs and quotas, in order to protect Canada's dairy farmers. However, this system has backfired, and caused the majority of Canadian dairy farmers to leave the market.
Tim Odd

US corn rush threatens prices - FT.com - 0 views

www.ft.com/...8b-11e2-b93b-00144feab7de.html

Soft Commodities Supply demand USA Corn

shared by Tim Odd on 20 May 13 - No Cached
  • US farmers driving floodlit tractors into the night have planted the most corn in any week on record in a sprint that could force prices lower on world agricultural commodity markets.
    • Tim Odd
      Tim Odd on 21 May 13
       
      Massive increase in supply will result in a massive decrease in price.
  • US Department of Agriculture data suggested farmers seeded a record 42m acres (17m hectares) in the seven days to Sunday – an area larger than Austria, Ireland or South Korea. Seventy-one per cent of corn fields were planted in the main farm states by Sunday, up from 28 per cent the week before.
  • Last year’s crop was decimated after extreme drought destroyed stalks in the nation’s heartland, sending corn prices to all-time highs.
    • Tim Odd
      Tim Odd on 21 May 13
       
      Incredibly low supply leads to incredibly high prices.
  • ...2 more annotations...
  • The USDA forecasts that the domestic corn crop will rise 31 per cent from last year to a record 14.1bn bushels.
  • Planted Illinois corn acreage jumped from 17 per cent to 74 per cent in the week, USDA reported.
  • Tim Odd on 20 May 13
     
    This article outlines the US corn market rebounding after an extended drought severely reduced the supply of corn in the US. Farmers are all rushing to produce as much as possible due to the high prices that came along with low supply, but this overproduction of corn is sure to lower prices further down than their equilibrium price from before the drought.
Tim Odd

Resource prices: Commodity prices in the (very) long run | The Economist - 0 views

www.economist.com/...resource-prices

Soft Commodities scarcity resources demand price

shared by Tim Odd on 20 May 13 - No Cached
  • three price trends corresponding to three time horizons: long-run trends, medium-run "supercycles", and short-run booms and busts.
  • Short-run booms and busts make for compelling financial journalism and can have nasty effects on the economies of commodity exporters.
  • these episodes seem to correspond to periods of rapid industrialisation and growth, producing an upswing in prices as soaring demand faces supply constraints, followed by a downswing as slowing growth meets expanding supply.
    • Tim Odd
      Tim Odd on 21 May 13
       
      This trend is identical to the business cycle.
  • ...3 more annotations...
  • soft commodities have been in collective and perpetual decline since 1850
  • Applying weights drawn from the value of production in 2011 suggests that real commodity prices have increased by 252.41% from 1900, 191.77% from 1950, and 46.23% from 1975. Of course, this result is largely driven by energy products. Applying weights drawn from the value of production in 2011 but which exclude energy suggests that real commodity prices have still been on the rise, having increased by 7.76% from 1900, 58.44% from 1950, and 1.97% from 1975. Applying weights drawn from the value of production in 2011 but which exclude both energy and precious metals suggests that real commodity prices have a more mixed record, declining by 3.94% from 1900, increasing by 39.91% from 1950, and declining again by 10.97% from 1975. Finally, applying equal weights (but including both energy and precious metals), real commodity prices have increased 2.01% from 1900, have increased 44.18% from 1950, and have decreased by 3.93% from 1975. Cumulatively, the picture emerging from this exercise is a clear pattern of rising real commodity prices from at least 1950.
  • While long-run price increases may not be an iron law (pardon), this does suggest that while innovation, substitution, and conservation can reduce the price impact of rising demand for fundamentally scarce resources, they can't necessarily eliminate it entirely
    • Tim Odd
      Tim Odd on 21 May 13
       
      Resources are not unlimited, and thus, over time, supply reaches zero, and as a result, price reaches a maximum.
  • Tim Odd on 20 May 13
     
    Since 1850, soft commodities have become more and more relatively scarce - less to go around per person - bringing with it long-run price increases, with no conceivable method to halt the demand and stabilize prices.
Tim Odd

Canadians trimming food budgets in face of higher prices, RBC says - Business - CBC News - 0 views

www.cbc.ca/...business-rbc-food.html

Soft Commodities Food Canada

shared by Tim Odd on 20 May 13 - No Cached
  • rising food prices was causing them to cut back on other expenses.
    • Tim Odd
      Tim Odd on 21 May 13
       
      Groceries are a highly inelastic good, as everyone needs to eat to survive.
  • Statistics Canada data shows food prices rose 2.4 per cent in 2012. That's after rising 3.8 per cent in 2011 and 1.4 per cent in 2010.
  • "My observation has been that when food prices rise, consumers trade down a bit to keep their overall monthly bill about the same,"
  • ...3 more annotations...
  • "They could trade down from organic to normal, from premium milk to regular. This is at least one reason why [the inflation rate] when it comes to food is misleading. People have enough choice that they don’t really need to spend more on food."
    • Tim Odd
      Tim Odd on 21 May 13
       
      People will trade down to inferior goods when funds are insufficient.
  • "But, the best cure for high prices is high prices — you can bet that farmers will be planting grains on their front lawns and as supply rises, prices will settle and will then eventually take consumer prices down."
    • Tim Odd
      Tim Odd on 21 May 13
       
      High price is a symptom of low supply.
  • Generally, raw food commodity prices take around six months to see a change at the retail level.
  • Tim Odd on 20 May 13
     
    Article outlining the effect of rising agricultural commodity prices. The main effect is that consumers will both shift their grocery spending to inferior goods, and spend less on other things. Even as food prices rise, consumers will tend to pay the same amount
Tim Odd

Ethanol Loses Versus Gasoline as Corn Falls on Higher Planting - Bloomberg - 0 views

www.bloomberg.com/...-falls-on-higher-planting.html

Soft Commodities Hard Commodities Corn Gasoline

shared by Tim Odd on 21 May 13 - No Cached
  • The spread, or price difference, expanded 0.27 cent to 23.86 cents a gallon as weather deemed favorable may have helped farmers put machines in the fields to make progress toward planting the 97.28 million acres, the most since 1936, predicted by the Agriculture Department.
  • Ethanol is made mostly from corn in the U.S., compared with sugarcane in Brazil. The worst drought since the 1930s last year pushed prices for the grain to a record and forced biofuel companies to temper output or idle operations.
  • Below-average output has helped deplete stockpiles of the fuel. Inventories that week slid 2.5 percent to 16.4 million barrels, the lowest since Dec. 3, 2010, the Energy Department’s statistical agency said in a May 15 report.
  • Tim Odd on 21 May 13
     
    Due to the massive US drought, limited corn supply brought up the price of ethanol - corn is a factor of production in ethanol - such high prices of ethanol has made gasoline - a substitute good - a more viable alternative.
Darshil Parikh

Keystone XL: Job Prospects Likely to Override Environmental Concerns - 0 views

www.firmex.com/...verride-environmental-concerns

jobs employment environment geopolitics tarsands greenhouse emissions keystone

shared by Darshil Parikh on 21 May 13 - No Cached
  • Supporters argue it will bring jobs and conflict-free oil to the U.S., while opponents say it will lead to unacceptably high greenhouse gas emissions from Alberta’s oil sands and threaten human health and water supplies.
  • But a recent poll by the Pew Research Center indicates that despite vocal protests against the pipeline, including arrests of high profile activists and celebrities outside the White House, most Americans support the pipeline. The poll surveyed 1,500 Americans by phone and found that 66% of them are in favour of building the pipeline while only 23% oppose the project.
  • Darshil Parikh on 21 May 13
     
    A good factual article on the Keystone XL pipeline controversy. It outlines the pros and cons of the building of the pipeline in terms of job creation and environmental impact.
Darshil Parikh

India Increases Import Tax on Gold - WSJ.com - 0 views

online.wsj.com/...4624404578255393384149804.html

gold india import demand supply tax deficit

shared by Darshil Parikh on 21 May 13 - No Cached
  • Traders, however, expressed worries that the higher tax will lead to imports through illegal channels from neighboring countries where tax rates are lower.
  • Gold is India's second-largest imported commodity by value, behind crude oil.
  • India's love for gold is partly to blame for the country's wide trade deficit and large current-account gap.
  • ...7 more annotations...
  • NEW DELHI--India Monday increased the import tax on gold for a second time in 10 months in an effort to cut demand for the yellow metal, one of the biggest contributors to the country's large current-account deficit.
  • India had doubled the import tax to 4% in March as part of the government's budget announcement.
  • India's current-account gap ballooned to a record $22.3 billion, or 5.4% of gross domestic product, in the July-September quarter.
  • The South Asian nation--where gifting of gold jewelry is a tradition during weddings and festivals--is the world's largest consumer of the metal, and it meets all its demand through imports.
  • The government increased the import tax to 6% from 4% with immediate effect. It also made a similar change in the import tax of platinum, which is considered by many as an alternative to gold for investment and for making jewelry.
  • The tax increase in March and the effect of the rupee's fall, which increased its local price, have already eased the demand for gold. But the government still considers the imports uncomfortably high.
  • The government also relaxed the conditions imposed upon gold deposits made by individuals with banks.
  • Darshil Parikh on 21 May 13
     
    A good article by the WSJ about the uncomfortably high demand for gold by Indian consumers. It outlines the impact of high good demand: large trade deficit, high amount of imports, large current-account gap.
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