Update:http://www.pjstar.com/business/x682903897/New-government-storage-for-wheat-and-cornNew government storage for wheat and corn? - Jun 08, 2010
Once upon a time, the U.S. government had a very large cupboard.
In that cupboard they stored wheat and corn. And they stored a lot. At one point it contained almost 30 percent of a year's production of both wheat and corn.There were two reasons for the government to have a cupboard
- also known as a grain reserve - in which grain was stored. The first reason was to provide a buffer against sharp price movements. As prices went up, grain from the reserve would go into the market to keep prices down. When prices declined, grain would go into the reserve, taking it off the market, increasing prices
.The second reason for a government cupboard was to have protection against production shortfalls - either in the U.S. or elsewhere in the world.Today, not only is the government's cupboard bare, it has sold the cupboard. The grain reserve program was seen as being too expensive and was abolished.
But some analysts think the grain reserve should be restarted. Their thinking was sparked by the surge in corn and wheat prices in 2007 when prices for those commodities doubled - despite excellent production around the world, including the largest wheat crop in history.
New farm legislation hearings have started across the country and will continue for several months. Could there be a call for a new grain reserve?
Let's not let our cupboard remain as bare as Mother Hubbard's.
Dr. William Bailey is chairman of the Department of Agriculture in the College of Business & Technology at Western Illinois University. His column will appear here every other Tuesday. He can be reached at WC-Bailey@wiu.eduhttp://www.marketskeptics.com/2009/02/does-chinas-60-million-tons-of-wheat.html Does China's 60 million tons of wheat reserves actually exists? -7 February 2009
This drought situation in China is getting interesting. The Chinese wheat crop is the single largest wheat crop in the world, roughly equal to the entire US and Russian wheat crops put together. And so is their annual consumption. That's a lot of wheat.
Clearly a serious crop failure there would have major global implications, wouldn't it? Not at all if you believe what many experts in the West are saying.
Virtually all of the major news services seem to be carrying stories playing down the impact on the market.
"The impact of China's drought on the world wheat trade will be none because of the size of their stocks," says one.
"China is not going to import wheat...they have plenty of inventory left over from last year," says another.
"We, as yet, do not see China becoming a major importer because of its massive Government reserves that could see them through an almost total disaster in the affected regions," say Frontier on their website.
They do have plenty of stocks too, somewhere around 60 million tonnes of the stuff depending on exactly who's report you read.
So it's all a load of hype then? Well, the government there don't seem to think so, on Friday they allocated 86.7 billion yuan (about $12.69 billion) from its reserve in relief funds to drought-hit areas.
Why would they do that if they had an amount roughly equal to the anticipated entire 2009 production of the US of wheat in state reserves?
Hang on a minute, I'm getting a touch of déjà vu here. Has anyone actually seen these reserves with their own eyes recently? Wasn't there a huge scandal in China not that long ago when it was discovered that storekeepers were getting paid by the government to store grain that wasn't actually there?
Just like the melamine thing was an open secret, you don't suppose it's been common practice for years for storekeepers to sell grain out of the backdoor whilst continuing to fill in the forms to the government do you? What a corrupt Chinese grain storage business as bent as a Arabs sword, surely not.
"Hello, Madoff Grain Storage. Yes, don't worry about your grain it's all here nice and safe for when you want it Mr Government Man, yes, yes, I'm looking at it right now. I counted it all for you yesterday, it's all there, don't you worry. Just wire me the money next week like you always do. Thank you, bye, missing you already."
Even so, this couldn't go on a large scale could it? We'd only be talking what, a maximum of 5% or something? And five percent of a 112.5mmt crop is only 6mmt. Yeah, but what if it had been going on for ten years! What's ten times six again? Bloody hell that's 60mmt!!
It couldn't happen could it? Nah, I'm only messing, that's about as likely as them buying wheat off us! And that isn't gonna happen is it?
What? They did that last month? Get me a nurse.
I love a good conspiracy theory.
My reaction: There is really scary idea. What if China’s 60 million tons of wheat reserves don't actually exists?
1) The Chinese wheat crop is the single largest wheat crop in the world, roughly equal to the entire US and Russian wheat crops put together.
2) A serious crop failure in China would have major global implications, if China’s wheat reserve don’t actually exist.
3) Considering it (theoretically) has an amount of wheat roughly equal to the anticipated entire US 2009 production in state reserves, the Chinese government is making an extreme effort to save its crops (spending $12.69 billion in drought-hit areas).
4) There was a huge scandal in China not that long ago when it was discovered that storekeepers were getting paid by the government to store grain that wasn't actually there.
5) China’s 60mmt wheat reserves could be a giant Madoff-style grain storage scheme.
6) China imported wheat last month.
Conclusion: If this is even remotely true, 2009 is going to be a really interesting year.http://www.preparednesspro.com/blog/tag/us-wheat-reserve/
7) The wheat and other food reserves have already been exhausted or are inaccessible. China has long bragged that they hold an enormous wheat reserve of over 150 to 200 million tons (2009). But news articles over the last 5 years account for China reducing that reserve is far in excess of what they claimed to have stored. No one can verify today that there is any wheat in reserve in China.India, which has a burgeoning population growth long bragged about their wheat reserves. Unfortunately, such reserves have been completely exhausted due to stark poverty and agriculture problems and replaced with low quality, rotting wheat instead
. Under India’s FCI act, the government is required to purchase all of the wheat, regardless of the quality. Thus, in an attempt to keep up with export contracts, India had to raid their stores of quality wheat and replace them with their poor quality, disease-ridden wheat instead for their own people.
As you know, the U.S. no longer has any wheat reserves
. The fact that the dollar has been so soft, makes the importing of U.S. wheat by other countries very attractive as their own currencies remain strong against the U.S. dollar. (See, even they understand that “stuff” is more important than money.)
Argentine dock workers going on strike has made worldwide access to the 3rd largest supplier of soy useless as the soy harvests simply sit in the port until concessions can be made. (A particularly uncomfortable problem for Europe, which is already experiencing a soy shortage due to the South American crops yielding less than normal.) Oh, and did I mention that Argentina is experiencing unusually heavy rains so far this year?
In fact, it’s in part attributed to the USDA’s false prediction of a bumper crop for the past two years that the U.S. chose to walk the edge of the cliff when they got rid of their excess food supplies
and sold them or donated them to hurting countries. The USDA told them that the food they were exporting would be easily replaced by the next two year’s harvests. In fact, they even went so far are to claim that we would have the “largest ever soy crop and the second largest corn crop. Well, here we are, two harvests later, and Mother Nature pulled a fast one on the USDA. In direct contrast to the suspicious predictions by the USDA, we experienced some of the WORST harvests of 25 years!
So, why did the USDA come out right and just plain LIE about the bumper crop predictions? Well, our friends, the Chinese have a lot to do with this one. They are the most heavily invested in our debt and they rely heavily on the U.S. for the food supplies. Remember, money is only as good as what it can purchase, right? So if China relies heavily on our ability to export food to them, then it requires them to play nice with us, right? So it’s important to the USDA anyway, that we keep up the pretense that our food supply is just fine and dandy and capable of keeping up with our own supply and demand as well as that of other nations which rely on us to feed them. Oops. We’re about to be discovered real soon folks. Not just by China (which latest numbers indicated that they own 25% of our foreign debt) but also by Japan, which is at 22% ownership of our foreign debt.
To make matters worse, are you aware that China is experiencing the worst drought ever this year? On March 19, 2010 one of the provinces worst hit by the drought , Guizhou Provice, released a statement claiming that the existing drought has affected 84 counties, cities and other areas within China, with a total affected population of 17.28 million persons.
Of that 17.28 million, the report claimed that over 3.1 million people are literally starving from a lack of food
. This drought has affected the drinking water supply for over 18 million people as well, including the water necessary for about 12.5 million acres of crop and livestock farms. They claim that over 2.9 million acres of land are already completely destroyed and unsalvageable. So far, this drought has caused a loss of $2.85 billion (US). The leader of the Yunnan Province, another province affected by the drought, told the Bejing News that local citizens in this area should “prepare for the worst.” Does this put China in a vulnerable position in which they are likely to do something desperate in order to protect their greatest asset—their man-power? Of course it does.