Firms (and nations) obviously always need some inventory to keep their commercial and other economic wheels rolling. From the mid-1990s or thereabouts, arguably many industries reduced their desired level of inventory holdings. They fought to keep only enough supply around to satisfy expected demands “just in time”. The information revolution and other productivity advances encouraged this practice of edging toward some minimum (yet hopefully safe) operating level.
Has there emerged, or is there now appearing, another shift in desired holdings of commodity inventories in days coverage terms (not merely in absolute arithmetical levels)? Has there been a change from “just in time” to somewhat of a “just in case” bias? There’s no cultural bright line between “just in time” and “just in case”. Yet picture the just in case perspective as one of greater fears regarding marketplace risks, with consequently higher inventory holdings.
Commodities differ, but let’s focus on petroleum. In any event, one should ask to what extent the petroleum inventory orientation is mirrored in other commodity territories, especially for goods that consumers “have-to-have” like wheat and corn.
Whereas the Fed (and the US Treasury) can print more money, they cannot print more land, even with a weak dollar. And US agricultural land acreage arguably will not increase much, though perhaps sustained stratospheric prices will change that scenario.
Remember that a growing world population yearns to improve its standard of living. For many, that means eating more food in general and protein in particular. The US is not the whole world, but it is a crucial agricultural exporter.
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