Vancouver Investment Advisor Ritch Wigham

The Chinese are Coming… Again!

The first corn exports of any significance have just been booked for the Chinese market. There are a number of factors within this development that we must pay attention to:

1. It has been years (like 10 or so) since any amount other than a token was exported from North America to China.
2. The drought that was last year and excess moisture this year has obviously created concerns within the agricultural ministry about supplies for the balance of this year.
3. the need for better more resilient seed in the Chinese market has become more immediate than previous years(Monsanto drought/moisture resistant GMO seeds)
4. the need to import more “FERTILIZER” (read Potash Corp etal) will become imperative.
5. The importation of food crops into an expanding economy suggests that this is a tool that will be used to help control inflation and may signal the importation of other food crops as well(read wheat)

In the coming months this development will become more and more of a factor in the markets. I want to remind everyone what happened a very few(two years ago) with the rice price and fear that hyper priced rice brought with it when drought affected the distribution of the crop world wide. A very small reduction in production creates a very real and immediate impact on pricing. Remember that our old rule of thumb was that” a 3% drop in world wheat production was worth about $1.00/bushel to the farmer”. I am not sure what the numbers are for corn or rice but I am sure that they would equate to a similar movement on a percentage basis.

I believe that this export news is a pre-cursor to another round of food grain tightness that will be very beneficial for our investments in the near term and suggests that the liberal pricing of grains and potash and other crop inputs is has reached a bottom for this recent time period.

To learn more, see this article from the Globe and Mail. (http://www.theglobeandmail.com/report-on-business/economy/boatloads-of-corn-mark-turning-point-for-china/article1566844/)

Talk to you all soon

Ritch

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