Much has been written about the surge in the price of lumber. Due to increasing demand and not enough lumber mill capacity, prices have risen almost 400% in just a year.
This has been painful for home builders, home buyers and for anything construction related including any small home renovation project. I’ve especially loved the memes that have popped up around lumber. Here is one:
But here is the thing, the worst case is your building costs go up. Or you decide to delay your project or downsize certain aspects of it.
And while everyone is focused on lumber, the commodity I’m worried about is corn.
Food is different. You can’t afford to not eat. And this affects the poor the worst. I worry about the poor for philanthropic and empathetic reasons, but also because this has real world implications to politics and financial markets.
The poor can handle a lot of difficulties and injustices, but when you can’t afford food for your family, then you really have nothing to lose.
The Arab Spring was not about democracy. It was about surging food prices. So was the French Revolution. The IMF has even studied this and there is a significant increase in violence and civil war when food prices jump.
When I see corn soaring, I think one thing: food prices are going up. An increase in food prices will disproportionately affect the poor and that means many really poor people will rise up and demand help. For those governments not equipped or not quick enough to help, look out.
This will increase tensions within countries and could destabilize governments in unpredictable ways. It could also provoke desperate countries to act in aggressive ways.
This is not good for poor people, not good for the world and is another head wind for financial markets, which don’t like surprises or political uncertainty.
I have no magic answer, no special investment to recommend, other than to say, stop paying attention to lumber and start worrying about corn.