Westernisation of Asian diet

COMMODITY WATCH

Adam Smith would have been so happy to see thriving McDonald's 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, urbanisation and growth pushed Asia to drop rice, an inferior good, and move to wheat. Westernisation 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 raised an alarm on wheat on October 16, 2006. And on November 6, 2006, we called a sell on the commodity and wheat futures topped at Rs 1144 a kg on NCDEX and fell 13 per cent 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 seven 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 wheat chart seems to be in the first down leg on NCDEX February wheat contract. All upsides should be capped by 0.382 Fibonacci at Rs 1050-1060 levels.

And about Asian diets, when preferences become a habit, then is when it hits the most. Who said, moving back to an inferior good is easy?

(Contributed by or-phe-us.com)

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