Food prices to post biggest rise since 1990: USDA WASHINGTON (Reuters) - U.S. consumers should brace for the biggest increase in food prices in nearly 20 years in 2008 and even more pain next year due to surging meat and produce prices, the Agriculture Department said on Wednesday. Food prices are forecast to rise by 5 percent to 6 percent this year, making it the largest annual increase since 1990. Just last month, USDA forecast food prices would climb between 4.5 and 5.5 percent in 2008. "It's a little bit of a surprise how strong some of the numbers were in July," USDA economist Ephraim Leibtag, who prepared the forecast, said in an interview. "We've been waiting for some moderation, but especially with some of the meat prices and how much has come through relatively recently (at the retail level) leads me

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Looks like my forecast is still right on the money -- producer prices the highest in 27 years. Once that feeds through to the consumer, the conservative, manipulated CPI will have no choice but to bust through to record highs as well. -- Larry Producer Price Index Jumps 1.2%; Housing Starts Reverse June Rise Washington (Wall Street Journal) -- U.S. producer prices unexpectedly soared at their highest annual rate in 27 years last month as rising wholesale prices for energy spread to a variety of products including automobiles, prescription drugs and capital equipment. Relief is likely on the way as energy and commodity prices have retreated this month while the U.S. dollar has firmed. Still, it will be difficult for Federal Reserve officials to look past this latest report, which comes on the heels of a 17-year-high rise in consumer prices.

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We have reached a disturbing moment in financial markets, where the noise to signal ratio across all asset classes is probably at an all time high, the August effect notwithstanding. Never has it been more important to adopt a strategic mindset to investing, rather than stampeding after the latest momentum trade without a shred of conviction. I've been a skeptic on economic decoupling, and had bet the right way on the dramatic reversal in the dollar (where I strongly suspect we saw discreet US intervention last week, possibly as a quid pro quo to the Gulf States/Saudi for maintaining their dollar pegs after recent visits by Hank Paulson). I'd advised a short on oil and other commodities, where the deteriorating outlook triggered a sudden slump, but I fear that equity markets are still dangerously complacent as to the risk of the brakes slamming on global growth. We will probably ...

What would you think if you discovered your mutual fund manager had turned over his portfolio almost 3 times? No, not in a year, in a day. Every trading day for a month. At any long only institution I know, men in white coats would within days have bundled the clearly demented portfolio manager away for some much needed downtime. But hedge fund managers are made of sterner stuff, and their wealthy investors don't ask too many questions but just pay their 2 + 20 (at least until it all blows up). Greg Coffey, the soon to depart star fund manager at GLG, one of the worlds most prominent hedge funds managing $24bn, runs an Emerging Markets fund with $4.6bn in assets. He returned 5.1% in May as he turned over the portfolio 56 times in the month, or on average 2.8 times a day. In total this one ...

After a relaxing break in the South of France, I've returned to see my portfolio gratifyingly boosted by recent contrarian calls on the dollar (short Euro), equities (long financials and pharma) and commodities (short oil and copper). The CRB index has just had its worst 4 week period in 50 years, losing 16% as the speculative bubble I've described many times on this blog popped with a vengeance. Nickel is down 46% from the highs, Wheat 41%, and Natural Gas 40%; copper and oil have just entered bear territory, both down 20% so far but copper may easily halve from the peak (see Copper and China post). The flip side of the commodity slump has been the resurgence in the unloved dollar; I suggested on 27 July in Has the Dollar Bottomed? that a major reversal was imminent, but its ...

I posted on July 17th that a historic reversal was at hand in Oil has Peaked, Banks have Bottomed, and that has proved prescient advice. Shorting commodities and resource stocks has been a great trade in the last few weeks, and one I have consistently recommended since late April, despite the continued hype and ludicrous price targets from many investment bank analysts, who have yet again revealed themselves to be glorified cheerleaders dancing around the latest momentum trade. The short banks/long energy trade was dangerously crowded, as evidenced by hedge funds suffering their worst month in years in July in a stampede for the exit. I wrote back on 26 May in It's the oil price, stupid, but for how long more? that 'Peak Oil is not at hand but peak speculation in oil may well be. Given the weight of resource stocks in key global indices ...

By Jason Simpkins Associate Editor Russia has generated considerable political ill will throughout the former Soviet Union and even in Europe by renationalizing its energy sector – ultimately using such state-run ventures as OAO Gazprom and its resource-rich position as weapons of economic diplomacy. And now that Russia has formed a state-run grain trader, analysts fear that Moscow is expanding these bare-fisted tactics to its agricultural sector. The new enterprise –The enterprise, the Agency for the Regulation of Food Prices, will take control of 28 government-controlled assets, including storage depots, grain elevators, flour mills and export terminals. The agency will control between 40% and 50% of the nation’s cereal exports by 2011. “The aim of creating the company is quite clear. As grain trade becomes attractive, bureaucrats are looking for ways of making some extra money using government resources,” a ...

The dilapidated state of much US public infrastructure, ranging from airports to highways, can be shocking for a visitor arriving from Europe or Asia. As evidenced by the tragic bridge collapse in Minneapolis last year, this is not just hampering national productivity but is becoming a critical threat to ordinary Americans. Over 25% of road bridges nationwide need urgent structural reinforcement or replacement at a cost of $140bn according to State transport officials, and yet additional Federal spending on bridge repairs is set to be just $1bn this year (and even that paltry amount has been vetoed by the Bush administration). Basic physical infrastructure from waste water treatment and dams to the electrical grid has been chronically underinvested in the US for decades (much of the highway network has seen little upgrading since the Eisenhower era), and sadly it may take further disasters to spur radical ...

Container traffic is the proverbial canary in the coalmine of international trade, and at Shenzhen in China, the port that serves key high value export industries, volumes fell in June by 0.6 per cent from the previous month and grew only 3.5 per cent against the same month last year; in H1 2008 volumes were up 7 per cent against 14% during the same period last year. At Shanghai, the country's largest port, container throughput has also halved, and these figures are all the more ominous given that June is the peak month for container traffic; exports are now slowing fast. The domestic situation doesn't look great either; China's stockpile of unsold new vehicles rose about 50 percent in the six months ended June, hitting a four-year high, as sales growth slowed. I have argued for many months that China's growth model was fundamentally unsustainable, and that the ...

After the speculative devastation his policies have wrought on the US economy, perhaps the devalued Greenback should be renamed the Greenspan in honour of the worst central banker this side of Zimbabwe. However, everything has its price; to paraphrase Keynes, in the beauty parade that is investment, the alternatives look even uglier. The Euro, Yen and Sterling all risk major fundamental downside over coming months as evidence mounts that their respective economies are sliding into recession; decoupling is dead. Meanwhile the US trade deficit is in rapid decline (although the fiscal deficit is set to soar, perhaps to $1trn within a couple of years). I turned more positive on the dollar in April, when bearish sentiment was extreme, in 'The Fed goes bust, the dollar goes up...', noting that the dollar had reached an inflection point in previous cycles midway through a recessionary period. Since then, as the ...