let's restore the Corn Laws while we're at it

People ask when the financial crisis is going to “spill over into the real economy.” This looks real to me:

The credit crisis is spilling over into the grain industry as international buyers find themselves unable to come up with payment, forcing sellers to shoulder often substantial losses.

Before cargoes can be loaded at port, buyers typically must produce proof they are good for the money. But more deals are falling through as sellers decide they don't trust the financial institution named in the buyer's letter of credit, analysts said.

…Access to credit is key to the survival of maritime trade and insiders now say the supply is being severely restricted. More than 90% of the world's trade by volume goes by ship.

The Baltic Dry Goods Index, the main measure of shipping rates, is down 74% from its high back in May when trade with China was still strong.

Via. The double whammy here is that more grain has been planted over the last year in response to higher prices, so the least we can expect is that prices stay high. And that might be the optimistic scenario. Letters of credit are kind of basic.

Comments

[Matt S]

This sounds hard to believe.

If we're talking big companies and high quantities, surely there is a some sort of customer credit record on file? These can't all be new customers coming to market?

This sounds like something that might impact upon a backstreet deal over some 'knock-off' dvds but not sort of trading expectations when working with big companies, high quantities and something as staple to our diet as wheat.

[Fellow Traveller]

First they came for the cows and I did nothing, for I was not a cow...

Looking at the historical record, biological entities that get loaded onto cattle trucks usually do just disappear don't they?

[Alex]

That'll be why they're called "cattle" trucks, FT.

[Alex]

I see that's "lost" as in "lost plutonium at $British nuclear power station", which is newspaperspeak for "not booked correctly".

[Fellow Traveller]

The notational cow has replaced the notational student.