"The Central Union of Agricultural Producers and Forest Owners (MTK) said Wednesday that the price paid to farmers for milk should be raised." , STT, 21-08.2008
While at the same time, Russia, our friendly neighbourg, is having issue on storing its grains (Wheat, Barley) on a record harvest.
"Russia, the world's second-biggest barley grower, risks running out of grain storage capacity after the best harvest in at least 15 years, threatening a government plan to expand agricultural output and exports. " , Bloomberg - 21.08.2008
So on one hand you have massive deflationnary pressure on grains and oil price - In fact agriculture commodities are all plummeting - and on the other we have a global economy that is slowing sharply, which will make inflationnary pressure subsides. Deflation will then be fought with lower interest rates, ECB rate cuts are on the pipeline some time the year to come...
Coming back to MTK, they should not try to pass cost or to make it happen, as its window of opportunitty has passed. It should have fooled the consumers earlier. At the end, what they are doing is only scaring consumers into believing that their purchasing power will deteriorate - they will only contribute to a bigger consumption slump and consumer confidence- Maybe they will profit in such slump as greedy investors and institutions do...
So Milk and Bread price should go down and massively in the next few years. If MTK protected "lamb" producers cannot handle that, then they should think about changing job...there is a shortage of nurses...
6 comments:
Housing Finland
Thats a great cow picture!
This article from NZ might interest you?
http://www.stuff.co.nz/4644309a1864.html
As has been mentioned on this blog russia has an inflation problem. Russia has some kind of boom on and this is evident by the number of tourists and the ability of ordinary Russians to find for example clothes prices in Helsinki attractive.
I am not so sure agricultural prices are falling much? From a new Zealand perspective there has been a massive increase in prices in the last few years in dairy in particular. So falls now? have to be taken in that context of massive increase.
Obviously the world economy is slowing and obviously the over indebtedness is going to play its part too.
Dispite the credit unwinding we **are** now seeing we are still not seeing a deflationary collapse across the board.
I see a Finnish Engineering company sold 200? million of mining stuff into China yesterday.
On the other hand the owner of one house in Kulosaari does not see a rosy future it seems?
The house was on the market at 1 350 000 yesterday and 1 190 000 today.
Even the one house in Helsinki where an owner raised the price 10 days ago from 420 to 430 decided that 399 might be better. A house you highlighted as being rediculously overpriced back in February 2008 at 520 is now at 344
Meanwhile as i pointed out before July 2008 Finnish food inflation is at almost 9%
Perhaps we cannot afford to wait too long to buy before the money is more or less worthless?
Hard to know. I am getting very alarmed about the possibility for a long term deflation and yet their are other things to be seen too that dont fit that profile at the moment. There is a massive farming boom in the USA for example
"Perhaps we cannot afford to wait too long to buy before the money is more or less worthless?"
If you are in a deflationnary trend which is what i think is about to happen then money will strengthen even more as time goes.
Just look at the car market. Price have been in a deflationnary trend in the past few years. From a level of overvalued price a few years ago, they are now becoming similar to prices seen in the continent... With today money you buy better and nicer car than 1 or 2 years ago.
The same will apply with housing as price are not realistic.
In parallel you will see cost of commodities, labour and land coming down (cement, copper, too much contruction workers for little to build will push their wage into a deflationary trend), it will make future build cheaper. The construction company will have to reflect that synchronized with a realistic readjustement of prices.
The example shows that real estate agency were in fact acting as speculators. Remember they make money in commission, the higher they sell the most they make. But now, they are changing attitude, as in a falling market it's better to sell and make little profit then none at all.
The right arms of Banks, the main real estate agents, might have been given information that the lending growth has deteriorated and that the housing market is now in a noise dive. They got to rush to close as many transactions before the market deteriorate further.
Some news coming from the other side of the Atlantic yesterday shows that the Financial troubles are amplifying with fall of two massive real estate institutions Fannie Mae and Freddie Mac. The real economy could be impacted quite badly, I think the stock market is correctly pricing the bad news as it lost world wide 25% of the value.
Now some deals, as you mention, are done today, but what people are worry is about tomorrow...Europe is like a boxer it has received many punch but still going to the next round... I think another punch and it will fall with a KO ...Europe is not Tyson ;->...
well the interesting thing about the bank owned agents is that they have little financial time pressure to adjust prices - unlike the private agents who dont have the desire to keep mortgage security. And yet there is no obvious noticable difference now between agents in reducing prices.
So we can assume the sellers are now in control of the market rather than the agents. You can often see a person change agent and then mark the price down *later*. We can guess from grief therapist that reality has to pass thru the denial depression anger acceptance phase of financial loss!
My "dream house" came back on the market today at the same price it went off the market back in June after 2 price reductions before. The bank agent told me it was a fantasy that prices were falling in the region. So i now know they will accept offers on the current marked "never to be reduced price". At some point my desire for this 'dream home' will overcome my worry and my partners concerns that it is 'in the middle of nowhere'......or instead some other dream will eventuate. Already i found a house with over a hectare of land nearby at half the price! Of such things are dreams made of.
I love property. My dad was disabled and his father was a builder. My brother and i lived my dads dreams. Dispite all the financial bullshit it is all i really know........or think i know.
I am trying to assess the lending criteria of Nordea because it is said to be the strongest Bank in Finland. From talking to Nordea they say that lending depends on each customer. A 75% loan at an income of 5 times seems to be a normal loan situation. But if the loan is small and the income large then the loan to value can increase. If there is a financial gaurantor or additional security the loan to value can increase.
However out in the blogsphere people are claiming lending standards are still lose in Finland. I agree that a 5 times multiple is pushing things already.
But can anybody give examples where the kind of loose lending practices that people are talking about are actually still true in Finland?
Ideally with company names so i can follow that up myself and check it out.
Thanks
Hi Andrew,
A 75% loan...that's a marketing approach. Indeed that's, maybe what they are doing now.
I can tell you that about 100% of the people i know that have purchased a house have, in no way, provided 25% deposit...
In fact, most are telling me that either Nordea, Sampo etc.. asked them to take an insurance with their 100% or more (since some got on top of the house: boats, motor bike, cars..you name it). This insurance is supposed to cover the risk but is costly and for some short live (up to 5 year contract).
Now I think, they are carefull in giving loan. Indeed they ask 25% as they want to protect themselves of a 25% drop at most...Time has changed...
Can we then find out which companies gave the insurance? Where is the risk now?
Is it with the banks because the insurance will be unable to pay out as per the USA? Just as with th CDO's and so forth? who actually is holding the bag? If i am with Nordea then Nordea has to be destroyed before i lose my money.
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