Dylan Grice: China Is About To Cause A Wheat Price Spike

We may be in for an even large spike in wheat prices than the world is currently experiencing if Societe Generale’s Dylan Grice is to be believed.

Grice compares what is currently happening with grain, to what happened with oil in the 1970s.

In that period, U.S. demand for foreign oil increased dramatically as domestic production went into structural decline.

Oil U.S. 1970s Dylan Grice

Photo: Societe Generale

Right now, the same thing may be happening with China and wheat, according to Grice.

China Land Productivity Dylan Grice

Photo: Societe Generale

From Dylan Grice (emphasis ours):

The strain first started to show in the collapse in Chinese inventories in the early 2000s. Now, as China tries to rebuild them it is showing up in China’s surging import dependency. It seems reasonable to think that it will soon be showing up in price.

And what else does that mean for Chinese demand? Why, Potash of course.

If BHP Billiton’s bid for Potash Corp succeeds, the Australian miner could own a third of the world’s potash supply in 10 years’ time. This week, a magazine interview in which Sinochem’s Han Gensheng said that Potash Corp was too pricey was pulled from Chinese news sites hours later. The site which had carried the comments now denies the interview ever took place. The Chinese appear to be getting twitchy on the security of their future grain supplies. Who can blame them?

Click here for the 25 countries that will be screwed in a world food crisis >

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