Friday, August 20, 2010

The pain in Grain is mainly on the Brain!

Wheat.Image via WikipediaThis week, CNBC commentators were asking if "Wheat is the new oil"! Of course they were referring to the troubles in the Russian Wheat pool and a possible 20% reduction in Canada's wheat crop this year and the impact of these two, otherwise unrelated events, on the price of grain, specifically Wheat. They were also wondering is "Potash the new oil". (the hostile bid on Potash Corp by BP Billiton)
My Deja Vu senses awakened when I heard the comments.  It took me back a year when the same CNBC pundits were asking, "Is Lithium the new oil" (electric car batteries) and two years ago when they asked "Is natural gas the new oil".  (new shale gas discoveries) It even took me back to the turn of the century (this century of course) when the same pundits were asking "Is hydrogen the new oil"! (hydrogen fuel cell vehicles)
It is of course, the job of TV news programs to catch the attention of viewers and this is often done with a headline that grabs the listeners attention. Oil has lubricating the world's economic system for 100 years, and will probably go for another 100 years, albeit, in a slowly diminishing capacity.
What concerned me about all of these attention grabbing headlines is that old sales adadage which goes something like this. "create a buzz, then sell the buzz". I certainly hope you are not falling for the buzz and running into the futures market to buy wheat, corn, soybeans or rice.
Yes, the world population is growing. Yes, a number of developing countries are growing a new middle class. Yes, these things will have an impact on food production and prices in the long term. But short term?? Canada has enough wheat in it's silos alone to make bread for the planet for the next year of two, and that does not even include this years (20% reduced) crop. Russia wasn't even doing a good job of feeding itself before the "wheat crises" there.
The major bread basket of the world, the United States, will continue to do what it does best. Produce good large crops of wheat, corn, soybeans, canola, flax, and fruits and vegetables of every kind imaginable.
By creating a "buzz" using the "fear factor", these pundits are acting no better than the "pump and dump" boiler room operators of the 1960's and 70's. However the boiler room is huge and hidden in the guise of legitimacy with a corresponding huge audience. Helping to create "Mini bubbles" in any commodity or stock, does not become CNBC, nor it's traders who go live every day with their "conviction picks". Shame!
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