Still think the global credit crunch is all about the TED spread and collateralized debt obligations? Think harder. Export-bound grain has started piling up in Canada as sellers have begun refusing to trust the credit lines and financial institutions linked to their foreign buyers.
The problem is that Canada's export cargoes don't get loaded until buyers can prove their ability to pay -- proof that has been increasingly hard to come by in the wake of bank defaults and shrinking credit markets worldwide. Unable to get credit lines, many buyers have left the grain market, generating big losses for Canadian shippers. Add to this the greater costs that shippers now shoulder because of delayed payments, and the picture starts looking pretty bleak.
And Canada isn't the only country suffering from the crunch. U.S. and South American shippers are taking even harder hits. Los Angeles and Long Beach -- home to two of the biggest ports in the United States -- have already seen a 9 percent drop in imports this year. Global shipping rates are down 74 percent from last May.
With 90 percent of the world's trade in goods going by ship, credit access is key to trade's survival. It's also key to investment in product development, which surely will fall as manufacturers face greater declines in profits. Moldy grain looks like small peanuts by comparison, but don't tell that to Canadian shippers. Grain is their country's biggest agricultural export.
So if that stuff isn't moving, that will mean we will may be looking at two different phenomenon soon. It will be a sort of "good news, bad news" thing. The good news is a possible drop in grain prices until this is straightened out, so maybe we can take advantage and stock up (remember big surpluses in supply means lower costs). The bad news is that the countries that we export to will become more unstable, leading to greater overall problems in the world's economy (which means that you had damn well better stock up).
Things are getting strange
Keep your eyes peeled for trouble.