Commodities Interlude: Wheat Falls in Chicago as U.S. Report May Signal More Exports Competition

From Bloomberg News. For those eating conventional meat and grains, this may signal the return to price normalcy. The wheat bubble has popped.

"Wheat fell on speculation a U.S. government report will signal more competition in the global exports market.

Russia’s wheat-exports estimate may be increased 1 million metric tons and Australia’s by 2 million tons, Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt, said in a report today. The U.S. Department of Agriculture’s report on global grain markets is set for release at 8:30 a.m. in Washington.

“The USDA is expected to increase Russia’s wheat export volume,” Fritsch wrote in the report. “Australia’s exports could also be corrected upwards.”

Wheat futures for December delivery fell 1.1 percent to $6.495 a bushel at 11:36 a.m. London time on the Chicago Board of Trade. Milling wheat for January delivery gained 0.1 percent to 187.75 euros ($256) a ton.

Russia’s wheat exports were estimated last month by the USDA at 18 million tons and Australia’s at 19 million tons.

The U.S. corn crop estimate will probably be lowered to 12.391 billion bushels, according to a Bloomberg News survey of 30 analysts. Last month’s USDA estimate was 12.433 billion bushels.

Corn for December delivery rose 0.3 percent to $6.6225 a bushel in Chicago. Soybeans for delivery in January fell 0.8 percent to $11.96 a bushel."

This does not mean the corn bubble has popped--if anything, it means the corn bubble has at least one more season to go because of last summer's drought. If we have another drought next summer, corn could be an ongoing bubble--the end of cheap corn, which means the end of cheap meat and eggs.

Conventional cow ranchers may switch their herds to wheat-based feed because it's cheapest, and if so, the price of all meats (even organic) should go lower in tandem as demand rises for the cheaper meat. Ranchers themselves may choose to decide switching to grass-fed to avoid two things: a recurrence of the last grain crunch, and the loss of high profits due to now-lower feed costs.

Not only did ranchers avoid the high feed/loss of profits combination by going grass-fed, but we supported them by paying for and eating their meat, meaning no need for government subsidies, and regained health for us in the process. We also avoided the grain crunch by voting with out wallets and not eating the stuff, or even the stuff that eats the grains.

Now that one consumer economic bullet has been dodged, will we ever go back? Probably not, and this will serve to induce more grass-fed operations--to preserve profits (in good times and bad), preserve health, and preserve independence from government subsidies and the bureaucracy therein.

The price of grass-fed and/or pastured meat and eggs is the TRUE price of these foods without subsidies. You may as well get used to it, choose your health over your wallet, choose subsidy independence, and pay accordingly. Those who choose not to pay and stick to conventional meats will cause the good stuff to come down maybe a little due to competition and weakening demand.

Or, conversely, the increase in people seeing the dietary and nutritional light may serve to prop up the grass/pastured meat ranchers, helping to keep them at this level until there's more grass/pastured competition to fight with, regardless of grain prices.

Let's hope. Either way, expect a continued rise in obesity and chronic illness with descending wheat prices, because bread and pasta products will definitely be getting cheaper in the future.