Prices Received By American Farmers 2/2007 Versus 2/2008 Q4 2007 Versus All of 2006 Projected 2008 Versus Actual 2006 ( 07 vs 08) (Q4 07 vs all of 06) ( Projected 08) Food Grains + 93.5% + 75.9% + 123.4% Commercial Vegetables - 32.1% + 31.6% + 25.7% Meat Animals No Change - < 1% + 14.6% Fruits and Nuts No Change No Change + 6.0% Dairy Products + 29.8% + 67.3% + 66.2% Poultry and Eggs + 17.3% + 28.2% + 41.8% The case for Stagflation has not been made logically as of yet. IMHO we are in a Recession, well into a recession that will really be felt by mid summer. The consumer is not buying MORE, they are PAYING MORE for all items from ENERGY to FOOD! We as a nation are not producing more. The GDP number under-estimates what individuals are spending, families are spending on food, Gas, etc vrs their Disposable income. The idiots believe that high fuel and Food Coast are "Temporary". World Wide competition for available "NATURAL RESOURCES" as well as Agriculture Products, (WHEAT, CORN, Etc), will drive prices far higher. Production Cost for the items are rising faster than you can say ohh shit. US consumers will be paying 6 bucks for Gas, IMHO by Next Summer, if not higher. There is nothing going on in the World Oil markets that would cause any bright person to believe that ENERGY PRICES will fall in 08/09 or even into 2010. Best case situation is for Energy/Oil prices to be at the current 08 levels, 110-120 per barrel. The only educated guess for weaker oil prices, if the World Economy is dragged down by the current recession, which is going to become deeper and deeper. If the US drags the Global Economies down, Oil may dip, all be if for a brief quarter or two....at most. How far down, no idea but I would say it would be safe say to buy oil at 90 if that happens. Clothing, Housing, Recreation, etc are going to be luxuries for the wealthy. The average consumer will not be able to to do much with their very weak purchasing power by end of summer. This is not doom and gloom. This is wake the F&*^( up and stop crying. But from my day to day activities and research, I have yet to see any sign of "Stagflation" at this moment. Everything is pointing to Inflation and Hyper-Inflation in Energy, Food.
Well I may be just a little bit more optimistic. In my opinion we have to possible scenarios, the latter is the one I believe to be more likely than the first. First scenario is that we fall into a recession and maybe even a deep recession and since we still produce 25% of the worlds goods there will be a decrease in demand for oil and thus an easing in prices. OPEC will likely even increase supply to entice industry to buy and produce. The other scenario is that the Fed's moves have staved off a recession and we are going to have things turning around. Since other Central Banks did not take the same actions as the US their economies slow while ours springs back into life. This brings the dollar to more attractive levels against its major competitors and thus has a drastic effect on oil prices, since its priced in DPB. Just my two cents. I'm not all gloom and doom. But you gotta have them both, bulls and bears; thats why our market works.
Deflation has left the port and will be arriving soon (it already has re big ticket items such as houses, cars, etc.).
Sure Bylo, but people already own far too many houses and cars. So how does deflation in those assets help the average person? Not at all. In fact, as prices rise on the necessities, there will be less money available to buy (and/or service the debt on) luxuries such as housing, cars, etc. which should drive their values down even further.
With those numbers it looks like the farmers are making out pretty good now. Before you know it, we will all be growing corn in our backyard, not just for lunch but for gas to drive to work.