The BDI Index,(shipping) points To worldwide famine.

[Jnana]

Steve,

I think what you're saying is exactly what the others are saying, that the index, although treating the price of moving goods, also gives an indication as to how much goods are being transported. Lots of goods on the ships, higher the price, fewer goods, lower price - supply and demand, nothing too complicated.

Right. But, a small change in shipping demand (10%-20%) can cause a large change in the price of shipping (90%), and BDI reflects the latter. A 90% drop in the BDI does NOT mean a 90% drop in the quantity of goods shipped, which is what some of the articles seem to be implying.

BTW, I don't have a problem with people posting articles of this nature. I'm not taking issue with the poster, just with misrepresentation of what the BDI means in some of the articles. Such as:

The BDI has dropped 94% in a short few weeks which means raw materials, grains, ores, steel, iron, cement and all imported products for food manufacturing and product manufacturing even though we actually do very little of that here in the US. We do make bread and other products that require grains, like cereals. We import clothing, gasoline, various fuels and, well, just about everything these days and the BDI says global shipping has shut down. NOTHING is moving.

Shipping is down, but is not "shut down". Goods are moving, but in lower quantities (and at MUCH cheaper shipping rates).

The Baltic Dry Index (BDI) is an indicator of how much product is actually out for delivery throughout the world.

No, not really.

If we can use the Baltic Dry Index (BDI) as a guide for the next 12 months of product delivery and food availability in the stores we shop in then the BDI says shelves will be virtually empty of almost every product we use each and every day.

The BDI is highly volatile, and is a lousy indicator of what will happen in the next 12 months. What the BDI indicates is that if demand does improve, there is plenty of cheap shipping available to move products.

I expect letter of credit issues will be worked out, but I don't know how long that will take.

[alyscat]

Thanks for clarifying it for me, Jnana. I knew that the 25% drops we were seeing here at the ports was not the same as the 94% drop in the BDI, just didn't know how it actually correlated.
alys

[Steve_A]

Hi Jnana,

I agree that the ratio between the price of shipping is not necessarily in ratio with the amount of goods being shipped, for example, if a ship is only half full, then the cost of shipping logically would be half the price.

However, there is a ratio. The index will still give an idea of the volume by publishing the price. This would make a lot of sense to the people who deal with the shipping industry, which is not my case.

There is another spin off to this also which needs to be added in. As we know the US dolar is, in general, the currency for international trade. We also understand that if the dolaris in high demand the value against other currencies rises. The opposite,of course if the dolar is not in so much demand.

As we can see from the BDI there is a huge lull of interest for the $US as the shipping market is huge (and expensive) and the prices have fallen over 90%. This will contribute to lower the value of the dolar against other currencies, thus making the purchase of goods more expensive for the US to buy from other countries, probably creating yet another drop in imports basically killing of the shipping industry as the pricing for shipping will be no onger viable for the ships to leave port.

I know the argument is simplified, and it needs to be so that we can understand the possible problem more easily.

As I see it, exporting countries, as is already happening here in Brazil, will have to sell products to the national market, which will mean in the short term a drop of income for the exporting companies, reduction of infrastructure, unemployment. In the mid term, companies that have re structured and new companies will evolve to produce more at national level and the whole ball game will start over again to find other countries to trade with.

Importing countries, on the other hand, (like the US, Russia, Germany) will suffer lack of products, particularly food stuffs, and their prices should rise creating a short term inflation to try and cover the cost of the price increases. Money will become short at street level and many will lose their homes, will have to cut back on luxury items, which will hit national semi durable good companies, which will lead to unemployment. The exit of this problem will be slower, as a loaf of bread is worth more than a hi-fi unit when you're hungry, and the tendency would be for the food producing countries to have the upper hand.

Once the source of food has been re established, then the technology based countries would come back in to it.

Of course we would have to equate a war or two in there somewhere.

I hope I've not gone off topic too much. These are just thoughts coming out.

I'd be interested to know of you thoughts.

Best regards,

Steve

Originally Posted by Jnana

Steve,

Right. But, a small change in shipping demand (10%-20%) can cause a large change in the price of shipping (90%), and BDI reflects the latter. A 90% drop in the BDI does NOT mean a 90% drop in the quantity of goods shipped, which is what some of the articles seem to be implying.

BTW, I don't have a problem with people posting articles of this nature. I'm not taking issue with the poster, just with misrepresentation of what the BDI means in some of the articles. Such as:

[Jnana]

My thought is simply that certain people are using the BDI, which most people have never heard of, and explaining it incorrectly, in order to make things look worse than they are. Not that things aren't bad, but there's a big difference between a 10% drop in shipping volume and a 90% drop in shipping volume. Beside, why use BDI as a proxy for shipping volume when actual shipping volume numbers are available?

The following information is primarily for finished products shipped to the US, not dry bulk goods as the BDI reports.

Ocean shipping: Port Tracker report says volumes are lowest in four years

Jeff Berman, Group News Editor -- Logistics Management, 1/20/2009 WASHINGTON—As has been the case in previous months, the economy is continuing to hinder global trade activity. This trend was once again reflected in this month’s Port Tracker report by the National Retail Federation (NRF), a retail trade association, and IHS Global Insight, a provider of economic and financial information.


The Port Tracker report noted that cargo volume at the nation’s major retail container ports fell for the 17th consecutive month in December, adding that 2008 was the slowest year for retail container volume since 2004’s 14 million Twenty-Foot-Equivalent Units (TEU). Annual volume for the 2008 was estimated at 15.3 million TEU compared to 2007’s 16.5 million TEU, marking a 7.1 percent annual dip.

Looking ahead, the Port Tracker report predicts January volume at 1.16 million TEU, down 6.3 percent from January 2008; February at 1.1 million TEU, down 11.1 percent from February 2008; March at 1.17 million TEU, up 1.1 percent from March 2008; April at 1.23 million TEU, down 2.6 percent from April 2008; and May at 1.25 million TEU, down 4 percent from May 2008.

--

More at the link above.

I haven't found the equivalent for bulk dry goods shipping volumes, but I expect it's out there someplace.

Yes, times are tough and companies and individuals are making adjustments. But when someone says OMG LOOK AT THIS NUMBER THAT'S DOWN 90% - PANIC!, it's time to do a little homework and see what the fuss is about.

I have no magic ball, I don't know where things will go from here. I tend to buy high and sell low, which shows how good my analysis skills are.

[BarryC]

Thanks also Jnana - very helpful. Just anecdotal, but I have a family member in shipping grains and they also saw a drop off but then a slight resurgence as these graphs show.

Then again, I would not dismiss what Dr. James says in principle because I think it IS wise to prepare. We should all do the thought experiment, "What would my family do if the stores were closed for a month or more?" Not to panic, just think it through - then thoughtfully prepare.

[peaceandlove]

About food shortage side of this thread:

WORLD FOOD SHORTAGE IS UPON US

BBC WORLD News posted on youtube 2/19/2009

Video (5:27): http://www.youtube.com/watch?v=C0CwuOGDQ-U

[peaceandlove]

Is the Baltic Dry Index Rising?

Catherine and News & Commentary, March 16, 2009 at 8:03 pm



Wikipedia on the BALTIC DRY INDEX: http://en.wikipedia.org/wiki/Baltic_Dry_Index

Source: http://solari.com/blog/

[peaceandlove]

When I searched Avalon for the BDI thread I found another thread had been started by Seth Haniel 1/20/2009 at:

http://www.projectavalon.net/forum/s...t=baltic+index

Excerpt:

We expect this 'Whole Thing' to 'come down' in March of 2009. 'We' have been urging you to stock up on…dry foods like 50 lb bags of rice, 50 lb bags of oatmeal, powdered milk, canned foods, canned vegetables and such to assure your family will have enough to eat when the world economy totally collapses.

Read below…and PREPARE YOURSELVES. Pass this on folks-Thanks/'S'

[Dantheman62]

Yes possible food shortages, and probably getting worse due to the severe drought in California and with summer coming up, getting even worse than now, due to it never hardly rains in the summer there! It's going to be a long summer here, be prepared!