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Food Price Inflation in 2011

Last week I noticed that certain economic sectors were seeing some rather dramatic price inflation over the past 12 months.  The numbers out of the U.S. are worrying:  Food price inflation of 17%, and Non-food agriculture (bio-Mass) 44.7% inflation.  That’s a lot, especially when you consider that the Nfa concerns ethanol (in plain English we are talking about Corn).  This morning, StatsCan revealed that the numbers for the 2010 harvest were looking bad, estimates for the wheat harvest (Alberta, Saskatchewan, Manitoba) at 22,200 tones is off the 2009 harvest by nearly 20% -- add to this the fact that Russia is experiencing dramatic drop in yields (because of excess heat and fire) and the impact good be serious. 

Canada’s wheat production has the following profile:

2010:  22,200
2009:  29,700
2008:  36,900
2006:  23,600
’00-05:  20,000 (avg)

This is equivalent to a 40% drop in lest than 36 months.  We know that China had a difficult year with its wheat production.  Now, this is not a disaster (forgetting what’s going on elsewhere in the world).  Average production for the first half of the decade was around 20,000 tones, so 22,200 is not the end of the world, bust still represents a poor harvest when we consider that worldwide wheat production is off

Canada only consumes 2,000 to 3,000 tones of wheat annually, the rest is exported.  Prince impact for 2010 is likely to be important, as the supply seems to be tight, and data supports that view.

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