Adam Smith would have been so happy to see thriving Mac burgers next to Andheri station in Mumbai. The vision of capitalism lived much beyond his imagination. But what might shock him though is how consumerism overwhelmed the invisible hand. And how sustained income, urbanization and growth pushed Asia to drop an inferior good rice and move to wheat. Westernization of the Asian diet is a demand factor, which does not find mention in leading grain think tanks around the world.
Rather the United States Department of agriculture came out with its alarm bell on wheat on 16 Oct 06, 6 Nov 06 we covered wheat last time here and 7 Nov NCX FEB wheat futures topped at 1144 and fell 13% by the end of 2006. Some might call it another lucky coincidence, we call it inverted incidence. If everybody knows of the crisis, the asset class will surprise. And that’s what wheat did. It surprised by a fall when conventional wisdom suggested a rise.
The news of the crisis came more than half a decade late. For us, the bull market for wheat started in 1999, more than 7 years back. Now the asset is forming a multi month corrective form. This means that all this hue and cry about the grain might actually push wheat further down before the crop really starts to re-exert its multi year bull trend. The chart on the right seems the first leg down of wheat on NCDEX FEB Wheat. All upsides should be capped by 0.382 FIB at 1050 – 1060 levels.
And about ASIAN diet preferences, when preferences become a habit, then is when it hits the most. Who said, moving back to an inferior good is easy.