On October 30th, 2009, NIA released an article 'U.S. Inflation to Appear Next in Food and Agriculture' in which we said, "A massive rise in agriculture prices is just around the corner."
Since then, as a result of the Federal Reserve's money printing, agricultural commodities made their largest ever short-term gain. After dipping from their 2011 highs, we believe agricultural commodities are likely to soon resume their rally as the Fed prepares QE3. From their lows in 2010, we look for agricultural commodities to make the same percentage gains seen from their lows to highs in the 1970s by the year 2015, at the latest. We look for agricultural commodities to reach their 1970s highs adjusted for the real rate of price inflation by year 2020.
Here are the percentage gains that agricultural commodities made from their lows in 2010 to their highs in 2011:
Cotton +241%, Sugar +164%, Corn +146%, Coffee +142%, Wheat +110%, Orange Juice +63%, Soybeans +57%, Cocoa +49%. Average: +121.5%
After reaching their highs earlier this year, here are the percentages that each agricultural commodity has dipped based on their current prices:
Cotton -60%, Cocoa -37%, Sugar -35%, Wheat -33%, Corn -25%, Coffee -23% Soybeans -21%, Orange Juice -13%. Average: -31%
After dipping, here are their current gains from their lows in 2010 to their current prices:
Coffee +86%, Corn +84%, Sugar +71%, Orange Juice +43%, Wheat +40%, Cotton +37%, Soybeans +24%, Cocoa -6%. Average +47%
Here are the gains these agricultural commodities made from their lows to their highs during the 1970s inflation crisis:
Sugar +2,480%, Cocoa +1,095%, Orange Juice +588%, Coffee +525%, Soybeans +435%, Wheat +404%, Cotton +311%, Corn +265%. Average +763%
Gains these agricultural commodities need to make from current prices to reach the same percentage gains from the 1970s, beginning from their lows in 2010:
Sugar +1,412%, Cocoa +1,169%, Orange Juice +384%, Soybeans +330%, Wheat +260%, Coffee +236%, Cotton +200%, Corn +98%. Average +511%
Gains agricultural commodities need to make from current prices to reach their 1970s highs adjusted for inflation based on the CPI:
Sugar +1,126%, Cocoa +728%, Soybeans +473%, Cotton +443%, Coffee +441%, Wheat +420%, Orange Juice +348%, Corn +200%. Average +522%
Gains agricultural commodities need to make from current prices to reach their 1970s highs adjusted for inflation based on the real rate of price inflation:
Sugar +4,203%, Cocoa +2,810%, Soybeans +1,914%, Cotton +1,809%, Coffee +1,800%, Wheat +1,726%, Orange Juice +1,473%, Corn +954%. Average +2,086%
NIA will be releasing many additional extremely important agriculture updates in the weeks and months ahead.
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