Got rice? If so, you are a king or queen right now. Across the US marketplace and in economies worldwide, a wave of panic buying is occurring, much like during the pandemic when consumers flooded stores to scoop up toilet paper, children’s Tylenol, and baby formula. So, if you plan to cook up a batch of your famous jambalaya or mushroom risotto, consider something else to impress your in-laws or love interest.
Have a Rice Day
The government of India implemented a ban on the exports of non-basmati white rice, which went into effect immediately on July 27. This comes nearly a year after officials restricted shipments of broken rice and added a 20% export tax. According to the Ministry of Consumer Affairs, the recent move aims to ensure “adequate availability” of the kitchen staple in India and help alleviate higher prices in the domestic market. Prices have surged 10% in the last month, topping $450 per metric ton. In the futures market, rough rice has risen more than 4% on the Chicago Board of Trade (CBoT) over the past month.
This is a dangerous decision with far-reaching consequences. India is the world’s largest rice exporter, representing more than 40% of the international rice trade. While this will mainly impact Bangladesh, Benin, China, and Nepal, markets worldwide are seeing consumers enter panic mode. The US and Canada are witnessing reports of shoppers scooping up as much rice as they can, particularly households of South Asian descent.
The situation could deteriorate fast, as Vietnam announced in May that it would limit its rice exports to four million tons per year by 2030, down from today’s seven million tons. The Vietnamese government says it is about “ensuring domestic food security, protecting the environment, and adapting to climate change.”
Is $4 Gas Coming Again?
The more things change, the more they stay the same. It has been a year and change since the national average price for a gallon of gasoline exceeded $5. Once again, US motorists are contending with higher prices at the pump. According to the American Automobile Association, the nationwide average for a gallon of gas is about $3.75, up nearly 20% year-to-date.
The leading cause has been the sudden rally in crude oil prices. West Texas Intermediate (WTI) crude futures firmed above $80 to finish the July 28 trading session, recording a 5% weekly gain and surging 14.5% this month. WTI also turned positive on the year. Oil accounts for about half of the cost of gasoline, so this explains why there is so much pain at the local mom-and-pop gas station.
So, why is oil soaring as of late? Investors are finally beginning to price in the global supply deficit that Liberty Nation had been warning about in recent months. Demands fears have abated, but supply concerns have been renewed. The Organization of the Petroleum Exporting Countries (OPEC) and its allies, OPEC+, have slashed output to facilitate a $70 price floor. Saudi Arabia and Russia have also cut production to support prices. In the US, production has been flat at around 12.2 million barrels per day this year, which remains below the pre-pandemic high and overall trend. Plus, the current administration has been steadily drawing down from the Strategic Petroleum Reserve (SPR) this year, tumbling close to 7% since the start of 2023.
After abysmal data, the Chinese economy looks to be firing on all engines, at least based on the latest energy data. The General Administration of Customs reported that crude imports in June increased 45.3% on the year to the second-highest monthly figure on record. This is terrific news for oil bulls since Beijing is the world’s largest crude importer.
Is $4 on the horizon? US demand has been lower than what it was a year ago, failing to eclipse nine million barrels a day in July. But steady consumption and any additional supply shocks could lift the national average for a gallon of gas above $4. Is it May 2022 all over again?
Bidenomics Makes the Economy Great Again?
In the second quarter, the US economy expanded by 2.4%, according to the Bureau of Economic Analysis (BEA). This increased from the 2% GDP growth rate in the first quarter and topped the consensus estimate of 1.8%. The GDP Price Index, a measurement of the prices of all goods and services sold in the domestic market, eased to 2.2%, while GDP sales came in at a better-than-expected 2.3% pace.
There was much celebration surrounding the GDP report, from the White House to the business media. But, as is typically the case, the expert class did not dive deeper into the numbers.
Federal, state, and local government spending contributed nearly 0.5% to the final print. In fact, real government consumption expenditures and gross investment has risen close to 4% year-over-year. Real private fixed investment, which includes everything from housing to factories ex inventories, has slumped more than 1% since the beginning of 2021. Moreover, real gross private domestic investment has decreased by about 3.1% over the last year. The tremendous growth in private inventory and business investment was also offset by a decline in exports and a slowdown in consumer spending (personal consumption represented half of the bottom-line GDP print, down from 2.79% in the first quarter).
The administration’s preferred measurement – gross domestic income – will be released by the BEA at the end of August, which could further signal a recession. But who knows if this is the White House’s position anymore?
America is jumping for joy that Bidenomics saved the economy. That is, so long as everyone ignores all of the other data that extend beyond the gross domestic product, from home prices to skyrocketing debt.
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