Loading ...I can’t copy it all. Sulfuric acid imports are being banned in Asia. Food crisis could be global according the their research.
Year-to-date, wheat is up roughly 30%. The breakout on the chart is the kind of base breakout any seasoned commodity trader would recognize as the start of a major move.
Because of an early heat dome across Kansas, Oklahoma, and the Texas panhandle, 34% of the winter wheat crop is already forming grain heads. This means that the crop is maturing two to three weeks early. Wheat plants that “head out” early produce smaller kernels, less starch, lower test weights, and dramatically lower yields per acre. But that’s not the real problem. The real problem is that American farmers planted the smallest wheat acreage since 1919.
Not since World War I, not since cars began to outnumber horses, has the United States, the world’s breadbasket, planted this little wheat. We are growing the smallest crop in 107 years, on the worst-rated acreage in a decade, in the middle of a Plains drought.
U.S. farmers didn’t plant less wheat because they wanted to. They planted less wheat because they couldn’t afford to plant it. The total cost per acre (seed, DAP, diesel, crop insurance premiums, equipment, labor, repairs, hauling, storage) to grow a wheat crop is roughly $685. The breakeven price for wheat, on a typical 45-bushel-per-acre Kansas yield, is therefore $15.20 a bushel. But wheat closed Wednesday at $6.58.
The American wheat farmer has been losing money on every acre for three straight years, even with crop-insurance subsidies and disaster payments propping up the income statement. Now the bank loans are coming due, the land is being foreclosed, and the equipment is being repossessed. U.S. farm bankruptcies are up 46% year-over-year (“YOY”), the steepest jump since the 2008-2010 collapse and the second-steepest in 40 years. Chapter 12 filings – the bankruptcy code provision specifically designed for family farmers – accelerated again in Q1 2026. Every farm that goes under takes acreage off the board. Sometimes permanently. Because the consolidation buyers are corporate operators who plant corn and soybeans (more profitable, easier to mechanize) instead of wheat.
This is how a supply shock builds. Not in a single bad-weather event. But in a multi-year squeeze where the marginal producer is wiped out one season at a time, until the only ones left can charge whatever the market will bear.
As supplies of food and other commodities tighten, prices will rise – far more than anyone expects. The U.S. Producer Price Index (“PPI”) is up 6% YOY already. Those increases will filter into consumer prices over the next 90 days, and they will keep rising. We’re facing the kind of inflationary shock we haven’t seen since the 1970s with a bond market that’s still pricing in inflation rates below 3% for the next decade.
War isn’t good for bonds. And there’s an entire generation of Americans who haven’t ever seen anything like what’s about to happen to the fixed-income markets. If the Gulf remains closed through the end of June, I think we’ll see 10-year yields above 6% – and rising. That’s not on anyone’s bond-market bingo card today.
In 2022, the bond market experienced a 237-basis point rise in 10-year yields as the massive COVID inflation was priced into the bond market. That produced a 13% loss in the investment-grade fixed-income markets (Bloomberg U.S. Aggregate Fixed Income Index). That was the worst year in the history (1976) of the index and wiped out $3.4 trillion in capital. That index doesn’t include high-yield bonds or muni bonds. If you include the losses in that part of the bond market, the total losses exceeded $4 trillion.
But as you probably know, there’s been a massive debt issuance boom. The bond market is now much larger than it was in 2022. Today a 150-basis point move higher in the 10-year Treasury yield (from 4.5% to 6.0%) would see losses of around $3 trillion in Treasuries, over $1 trillion in agency mortgage bonds, and over $1.2 trillion in investment-grade corporate bonds… plus another $1 trillion in everything else… for around $7 trillion in losses.
Long-term rates over 6% would push margin rates at brokerage firms to 10% or more. How much of the $1.3 trillion in margin debt would remain outstanding at those rates? Not much.
We’re heading into a huge crisis for the world and for our bond markets with a government that doesn’t seem to want an off ramp. Meanwhile, the stock market is trading at all-time, peak bubble levels. This is, without a doubt, the worst risk-to-reward set up I have ever seen in the stock market across my entire 30-year career. If there’s a happy ending here for investors, it will be a miracle.
How to hedge against these risks? Own the businesses that can convert cheap American energy into everything the world is now short.