Serious Food Inflation (read shortages) Hitting China Due to Storm

This is quite a storm and you see nothing about it on the US TV screens except a 20 second blip on CNN. Again, we are so inward looking - this is a massive situation.

Taking away the human aspect and thinking as investors, keep in mind the Chinese have been hard balling the potash consortium trying to get a better price. I think that option is quickly leaving the table.

Also this should do quite a heck of a dampening affect on Q1 GDP in China.

It is just the sort of things such as this that make a very tenous world grain situation turn into a potential crisis. And each day/week/month that passes can create a new crisis as it's all weather dependent. One day I guess people will pay attention. Until then we can hide under the covers while the Morgan Stanley analyst cries about the blip in potash inventories - "mommy mommy, I found a way to bring the stocks down to get clients in!" [Morgan Stanley Worried About Fertilizer]

Do they realize these companies have their customers on allocation? Allocation is a fancy word for RATIONING. Sounds very reasonable to cry about a blip up in potash inventories with your customer base on rations. Quality research work again from our lovely analysts.

Anyhow, on to the latest global crisis that does not matter because Britney Spears went into the hospital this morning....(I do like how the article rips on the yuppie professional Chinese haha)

• Hundreds of thousands of desperate travelers, some hoisting terrified children or baggage over their heads, pushed their way onto trains Thursday as service resumed after the worst winter storms in decades paralyzed China.
• Railway officials said the restored service could carry 400,000 passengers a day, but hundreds of thousands of stranded people, most of them migrant workers, were still waiting to leave the city.
• A record 178.6 million people - more than the population of Russia - were expected to ride the rails. Most would be riding in "hard-seat class," in train cars with only hard wooden seats.
• A top agriculture official warned Thursday that snow battering central China has dealt an "extremely serious" blow to winter crops, raising the likelihood of future shortages driving already surging inflation.
• Regions hit by the worst winter storms in 50 years provide the bulk of China's winter fruit and vegetable production, Chen Xiwen, deputy director of the Communist Party's leading financial team, told reporters.
• Chen said the overall effect on agriculture depended on how long the storms lasted and whether they moved into northern China, which produces most of the country's wheat and oil crops. "If it heads northward, then the impact on the whole year's grain production will be noticeable," Chen said
• Along with crops, fish and poultry farms have also been hard hit, and much industrial production is at a standstill.
• Transport delays have already driven up vegetable prices nationwide, with those in the hardest hit areas more than doubling. Wholesalers in Beijing were quoted as saying only about 20 percent of the usual supplies of fresh vegetables were reaching the city.
• Chinese cuisine places an emphasis on fresh produce, much of which is now grown in plastic-sheeted greenhouses that have buckled and collapsed under the snow.
• In the central city of Zhengzhou, tomatoes had doubled in price since before the storms hit, local media reported. Lamb and other meat prices soared in the southern transport and manufacturing hub of Guangzhou, and in nearby Shenzhen, the cost of 47 types of vegetables had risen by an average of 36 percent, the reports said.
• Fuel prices have also increased, with anthracite coal for household heating rising by 75 percent to $208; per ton from before the snow.
• Authorities have ordered a priority given to coal and food shipments, with all tolls, fees and restrictions waived. On the tropical island province of Hainan, transport bottlenecks maxed out refrigeration capacity, with large amounts of fruit and vegetables at risk of simply being left to rot.
• Food shortages complicate Beijing's struggle to lower inflation by increasing supplies, a task the government has made a top economic and political priority. Double-digit increases in food prices for much of last year drove December's inflation rate to 6.5 percent.
• In other remarks, Chen said January's inflation rate would likely stay around the December mark, despite the weather-related disruptions. (sounds like our government... whatever the reality is on the ground, just say inflation is contained and its not an issue - keep lying to the peons)
• The government has already responded with a variety of measures, from freezing prices for a slew of goods, to boosting farm subsidies and curbing industrial use of corn.

Shortages.
Inflation.
Shortages.
Inflation.

I said it August 2007. I say it today. I'll say it in August 2008, 2009, 2010. These are the epidemic problems of our future.

I was holding off on buying Powershares DB Agricultural Fund (DBA) until it pulled back, but the thing never pulls back. [Food....Food....Food] Just like with coal... it time to bite the bullet and ignore the short term noise and understand this is probably the best hedge we have on earth right now. Crops. Any crop. Better than gold; at least you can eat this hedge. (I did buy some more gold today...)

And fertilizer... well, you know the story.

Long fertilizer and will be long Powershares DB Agricultural Fund tomorrow; long a lot of fertilizer in personal account