World Grain - December 2010 - 31

FEATURE: ARROW POINTED UPWARD FOR GRAIN PRICES

Chinese plan to build 88 new cities of 4
million people or more."
That means that within 10 years China
will have created enough new demand
for food to equate to the E.U.-27.
"Keeping up with the demand is going to be a struggle for all of us," he
said. "If you're a major producer and
exporter and you have adverse weather,
we are going see grain prices probably
reach record highs."
He said the 2011-12 bull market will
be much more structural than what occurred in 2008 when the money just
kept flowing and crude oil rallied.

bull market - at least I envision it that
way - with there being no room for any
additional supply dislocation due to adverse weather.
"This is a multi-year bull market that
only can be solved by two or three years
of very favorable growing weather. If
the United States had a drought or South
America or Europe, prices could go

very high and very quickly the world
could find itself in a food security issue.
If, indeed, we have another grain problem somewhere - boom, it just kind of
all explodes. We do not have the stocks
to fall back on."
MEAT DEMAND GROWING
Despite high grain prices, the meat

"If you're a major producer
and exporter and you have adverse weather, we are going to
see grain prices probably reach
record highs."
- Dan Basse, AgResource
"My work suggests this will be
around for some time. Now what does
this mean for us? Will China be forced
to import corn and wheat?" he said.
Basse said that China, if it really
wants to cool food inflation, will have to
engage itself in greater imports.
"In fact, if you are all history buffs,
the Chinese tried to control inflation
by food controls back in 2007," he
said. "At that point, we in the grain
industry really didn't care. It didn't affect us at all."
However, he did expect increased
demand to force people to take another
look at biofuels.
"I think this food-versus-fuel debate
will become heated sometime in the upcoming year," he said. "I think it's coming back."
Basse said "risk management" has become the new buzzword in grain trading.
"Whether that's management of price,
management of counterparty, or management of financial assets, I think the
risk side of this thing is going to be rather dramatic, and so we have a structural

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World Grain - December 2010

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