World Grain - May 2014 - 38

FEATURE: BEARISH FORECAST FOR GRAIN MARKET

have reached up to $4,000 a car," he
said. "We couldn't get the rail cars in a
position that we needed to and there was
a shortage of supply."
That is because of the boom in fracking. "Fracking requires lots of sand and
water. A lot of those railcars were tied
up doing fracking opportunities in North
Dakota. The thing my hedge fund clients are talking about now is the price
of the species," he said. "Cattle and hog
prices in the United States are record
high. They are rising in other parts of
the world also. The reason being that
ethanol for the last seven years has kept
grain prices relatively high."
"During that time we have liquidated
the U.S. cow herd to the lowest level
since 1947," he said. "If you don't have
cows, you don't have feeder cattle and
you don't have fat cattle."
The hog herd is also affected by
the disease PED (Porcine Epidemic

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Diarrhea virus). "We believe that we
lost, in January, 1.2 to 1.3 million hogs
due to this virus," he said. "What we
produce is fed to livestock."
Per capita food consumption retains
the potential to have a bullish impact.
"Everybody wants to eat like a
European," he said, meaning 3,000 to
3,500 calories per day. "I would argue
that may be 500 to 1,000 calories too
many, but that's what we consume."
"This has been part of the bull market in agriculture. At the same time as we
have had this rising caloric intake we have
the Federal Reserve Bank in Washington
printing lots of lots of money trying to
reflate everything. Notice that balance
sheet now in the U.S. has expanded and
we are still putting $55 billion a month
into this up to approximately $4.3 trillion. This is a new experiment."
U.S. moves to take away some of
the stimulus had resulted in a response

from some world currencies that he described as "rather dramatic," including
the Indian rupee, the Russian ruble, the
Brazilian real, and the Argentinian peso.
"When the taper started in December
and we started to hear rumors of a taper
in May, the currency contagion started.
If I look back and we look at, let's say,
the price of soybeans in Argentinian
pesos or in Brazilian reals, notice that
for a lot of South American farmers the
price for their grains is at or near record
highs," he said. "It's a good time to be a
Brazilian farmer. It's a great time to be
an Argentinean farmer if you can convert it into dollars."
Basse said Chinese wheat production is
expected to reach up to about 126 million
tonnes, which would be a new record.
"Everything we hear from Chinese
wheat areas is generally favorable. Notice
how many years in a row that the Chinese
have had very good crops going back to

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