Nogger's Take On Everything - They'll Be Putting Bread On eBay Before Long

The High Street banks are penny shares, the pound is down 10 cents in a day and a half and there are P45's and administration orders falling like confetti.

What the hell is going on and where is it all going to end? Suddenly the word crisis doesn't seem anything like enough to describe the current situation.

The banking crisis looks like it's going to drag the pound lower, much lower, but we aren't the only ones in a mess by any means. The entire world is in the biggest mess in living memory, and it isn't going to get better anytime soon.

Exactly how we get out of this situation is something for the politicians to sort out. And sorting it will also surely sort out the men from the boys. It's certainly something beyond the remit of yours truly.

So what's gonna happen in the meantime? If we are talking agri-commodities I'm bullish. Very bullish.

The grains have quite successfully divorced themselves from crude oil. This trend has been going on since around October & has been mentioned on here several times since. I haven't got the time right now to publish a chart to illustrate the point, if you want to see a fairly recent chart go here: Are Crude And Soybeans Getting Divorced?

It is of course only a fairly recent phenomena that we automatically expect grains to follow crude. A trend brought in by the ill-conceived biofuel from food industry.

A by-product of the global economic meltdown we are witnessing now, I think, will be to throw up the next big challenge that lies ahead: food shortages.

You can cut demand for oil, iron ore, concrete and copper all you like. We can all stop buying iPhones and 42" plasma TV's, the one biggest certainty we can say now is that the one thing that will continue to grow, despite whatever happens in the remainder of 2009 and beyond is population.

And people have to eat.

Another by-product of the current predicament, potentially, is reduced inputs.

Throw into that mix the explosive ingredient of a serious crop failure or two and we might all be queuing outside the bakeries.

It might be worth considering at this point that we have just seen an Argy wheat crop come in some 45% lower than last season due to drought. the first serious weather problem anywhere in the world since the Australian wheat disaster in 2007.

What happens this year if we get a serious problem in the northern hemisphere? US, Russian, EU-27 and Chinese winter wheat plantings are already significantly down. What will production be like with lower inputs AND a weather problem?

Incidentally, Argentina has been in a serious drought situation now for twelve months. Unofficial information coming my way tells me that the 2009 soybean crop could finish up nearer 30mmt than the current predictions from the USDA et al of around 50mmt.

Sounds crazy? Why? The wheat crop IS 45% down, why can't the soybean crop be down a similar amount as well?

That's my lot. I've got a slightly past-its-best thin sliced loaf here if anyone wants it. If not it's going on eBay.