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Old 02-09-2009, 02:44 PM   #1
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What's your take on this guy?

The BDI Index Points To Worldwide Disaster

I've been reading his site and he seems a bit crazy. Is what he saying something to be worried about?
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Old 02-09-2009, 04:17 PM   #2
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He needs a better designed webpage.
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Old 02-09-2009, 08:17 PM   #3
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Baltic Dry is a useful index of trade.

I believe that the statistic of 94% decline in the Baltic Dry is more or less accurate though it has since recovered somewhat.

Bear in mind that this index was at very high level in the two or three years up to 2008. Also, important to bear in mind the index can be volatile and dramatic increases and decreases are not unprecedented.

Baltic Dry Index currently is at around the mid 2002 level.

See the graphs:

Baltic Exchange Dry Index (BDI) & Freight Rates



In conclusion, global food shortages are by no means imminent, in my opinion.

Baltic Dry Index will always dip in a recession. I also understand there was a problem with shipping companies obtaining letters of credit post-Lehman collapse, which I think has now been resolved.

(Edit: BTW, the link is from Rense. It really is not a reliable website. I think I once posted an article from it here, before I found out it was a haven for conspiracy theorists of the more wacko variety together with borderline or actual anti-semites.)
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Old 02-09-2009, 08:23 PM   #4
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Very spooky indeed. I don't think it would be foolish to follow his advice on stocking up on food etc. - even if he's wrong you still have the food...if he's right, well...
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Old 02-09-2009, 08:40 PM   #5
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Quote:
Originally Posted by financeguy View Post
Baltic Dry is a useful index of trade.

I believe that the statistic of 94% decline in the Baltic Dry is more or less accurate though it has since recovered somewhat.

Bear in mind that this index was at very high level in the two or three years up to 2008. Also, important to bear in mind the index can be volatile and dramatic increases and decreases are not unprecedented.

Baltic Dry Index currently is at around the mid 2002 level.

See the graphs:

Baltic Exchange Dry Index (BDI) & Freight Rates



In conclusion, global food shortages are by no means imminent, in my opinion.

Baltic Dry Index will always dip in a recession. I also understand there was a problem with shipping companies obtaining letters of credit post-Lehman collapse, which I think has now been resolved.

(Edit: BTW, the link is from Rense. It really is not a reliable website. I think I once posted an article from it here, before I found out it was a haven for conspiracy theorists of the more wacko variety together with borderline or actual anti-semites.)

That's good to know. Thanks for your insight. I'm on another website and there are some people who are a bit nutty about things like this.
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Old 02-10-2009, 10:05 PM   #6
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The shipping traffic may be easing back up again but this may be the bigger challenge.

Catastrophic Fall in 2009 Global Food Production

by Eric deCarbonnel
February 10, 2009

After reading about the droughts in two major agricultural countries, China and Argentina, I decided to research the extent other food producing nations were also experiencing droughts. This project ended up taking a lot longer than I thought. 2009 looks to be a humanitarian disaster around much of the world

To understand the depth of the food Catastrophe that faces the world this year, consider the graphic below depicting countries by USD value of their agricultural output, as of 2006.



Now, consider the same graphic with the countries experiencing droughts highlighted.



The countries that make up two thirds of the world's agricultural output are experiencing drought conditions. Whether you watch a video of the drought in China, Australia, Africa, South America, or the US , the scene will be the same: misery, ruined crop, and dying cattle.

Lack of credit will worsen food shortage

A lack of credit for farmers curbed their ability to buy seeds and fertilizers in 2008/2009 and will limit production around the world. The effects of droughts worldwide will also be amplified by the smaller amount of seeds and fertilizers used to grow crops.

Low commodity prices will worsen food shortage

The low prices at the end of 2008 discouraged the planting of new crops in 2009. In Kansas for example, farmers seeded nine million acres, the smallest planting for half a century. Wheat plantings this year are down about 4 million acres across the US and about 1.1 million acres in Canada. So even discounting drought related losses, the US, Canada, and other food producing nations are facing lower agricultural output in 2009.

Europe will not make up for the food shortfall

Europe, the only big agricultural region relatively unaffected by drought, is set for a big drop in food production. Due to the combination of a late plantings, poorer soil conditions, reduced inputs, and light rainfall, Europe's agricultural output is likely to fall by 10 to 15 percent.

Stocks of foodstuff are dangerously low

Low stocks of foodstuff make the world's falling agriculture output particularly worrisome. The combined averaged of the ending stock levels of the major trading countries of Australia, Canada, United States, and the European Union have been declining steadily in the last few years:

2002-2005: 47.4 million tons
2007: 37.6 million tons
2008: 27.4 million tons

These inventory numbers are dangerously low, especially considering the horrifying possibility that China's 60 million tons of grain reserves doesn't actually exists .

Global food Catastrophe

The world is heading for a drop in agricultural production of 20 to 40 percent, depending on the severity and length of the current global droughts. Food producing nations are imposing food export restrictions. Food prices will soar, and, in poor countries with food deficits, millions will starve.

The deflation debate should end now

The droughts plaguing the world's biggest agricultural regions should end the debate about deflation in 2009. The demand for agricultural commodities is relatively immune to developments in the business cycles (at least compared to that of energy or base metals), and, with a 20 to 40 percent decline in world production, already rising food prices are headed significantly higher.

In fact, agricultural commodities NEED to head higher and soon, to prevent even greater food shortages and famine. The price of wheat, corn, soybeans, etc must rise to a level which encourages the planting of every available acre with the best possible fertilizers. Otherwise, if food prices stay at their current levels, production will continue to fall, sentencing millions more to starvation.

Competitive currency appreciation

Some observers are anticipating “competitive currency devaluations” in addition to deflation for 2009 (nations devalue their currencies to help their export sector). The coming global food shortage makes this highly unlikely. Depreciating their currency in the current environment will produce the unwanted consequence of boosting exports—of food. Even with export restrictions like those in China, currency depreciation would cause the outflow of significant quantities of grain via the black market.

Instead of “competitive currency devaluations”, spiking food prices will likely cause competitive currency appreciation in 2009. Foreign exchange reserves exist for just this type of emergency . Central banks around the world will lower domestic food prices by either directly selling off their reserves to appreciate their currencies or by using them to purchase grain on the world market.

Appreciating a currency is the fastest way to control food inflation. A more valuable currency allows a nation to monopolize more global resources (ie: the overvalued dollar allows the US to consume 25% of the world's oil despite having only 4% of the world's population). If China were to selloff its US reserves, its enormous population would start sucking up the world's food supply like the US has been doing with oil.

On the flip side, when a nation appreciates its currency and starts consuming more of the world's resources, it leaves less for everyone else. So when china appreciates the yuan, food shortages worldwide will increase and prices everywhere else will jump upwards. As there is nothing that breeds social unrest like soaring food prices, nations around the world, from Russia, to the EU, to Saudi Arabia, to India, will sell off their foreign reserves to appreciate their currencies and reduce the cost of food imports. In response to this, China will sell even more of its reserves and so on. That is competitive currency appreciation.

When faced with competitive currency appreciation, you do NOT want to be the world's reserve currency. The dollar is likely to do very poorly as central banks liquidate trillions in US holdings to buy food and appreciate their currencies.
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