01/13/11, 04:52 PM
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Join Date: Jan 2004
Location: MN
Posts: 7,570
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Here's what happens:
We think we need about 10 million more acres of crops next year, to satisfy what other countries want to buy from us, plus to build up our reserves a tiny bit to 'comfortable' amounts - protection against drought, flood, pests, etc.
The experts figure we can gain about 6 million extra acres - through double cropping more, and better yields, etc.
That leaves a shortage of 4 million acres - corn, soybeans, and wheat all would like a few extra acres.
So this spring, there will be a 'battle' between the different crops. each wants to gain about 1-2 million more acres than available. So buyers will 'up the bid' on crops, to get farmers to switch from growing wheat to growing soybeans, for example. A lot of this 'bidding' ends up on paper, no actually buying bushels of grain, but speculation to get farmers to plant more of this or that. Maybe only 10% of a crop _actually_ gets bought & sold at the crazy high prices.
If it is bad weather early, then people panic about corn, and up the price. If we have great weather early in spring so lots of corn gets planted, people panic about soybeans and bid the price of beans up, so we stop planting corn & put in more beans. And so it goes, back & forth.
Come next fall, we have enough grain - the USA produces a lot more grain than it uses, so we _never_ run out. So prices likely will be back to a more 'normal' price. This is all about exports to other countries.
For the time being our dollar is very weak; the peope of China are moving to cities and want way more food than they used to have - and they have a fair amount of money because of all the stuff we buy from them..... So our grain looks real good buy to them, and they want to keep buying it.
It would seem grains will continue to be on the higher side for the next 2-3 years tho, as China demand should continue; fuel and fertilizer prices will remain higher, and our USA dollar remains in a funk.
Whle books, and differening opnions, could be written on any one item i mentioned, but this is kinda how it will play out. Maybe?
I hear intelligent people talk about corn, wheat, and soybean prices _doubling_ before summer, in an effort to balance things out. That is certainly an extreme, and again it would not be a whole lot of _actual_ grain changing hands. It's all about shaking trees, to change planting intentions.
Also would get a lot of pressure on govt to 'do something' to bring down grain prices. Look how high they are!
But if the govt does something, that could be _very bad_ 3 or 4 years from now.... Farmers would have no reason to push production; other countries would look elsewhere to buy grain hurting our GNP, and the world could face real, actual food shortages in a few years.... If the govt over racts and 'does something' about goofy high grain prices.
For you & me, it's gotten a little more expensive, and harder to book grains ahead of time. Mostly we can sit by & watch the fireworks, long term things will come back to normal once the 'acre battle' sorts itself out by June.
--->Paul
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