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| Am going to work up other crops today.
For this next year, or two, I am of the opinion the price relationship between wheat and corn will not stand & that I want to set up the long term speculative trade of being long corn and short wheat; but, I am not yet done with the crunching of numbers.
I finished corn last night, here is my gut feel as I begin working on wheat & might be wrong. Those of us on this forum who are senior citizens & those who study the history of crop production may well recall strong prices do buy acres.
in 1949 we had 383 million in crop, 26 million idle & 69 in pasture.
in 1978 we had 369 million in crop, 26 million idle & 76 in pasture.
2 months ago, I was of the opinion a bust cycle would be avoided & what we would most likely see is a shifting of acreage in the overall mix; however, these extreme prices ARE going to put more acres into production in some countries such as in E.Europe, SE Asia and SAmerica which do have some reserves of crop land. Agriculture does respond to higher prices. Further, some of these countries are behind in technology but are bound to catch up quick.
I may have a different opinion tonight, but I sense a possible bump (all depends on weather) ahead but once through the bump & absorb it..I then think all will again stabilize....question is...will the bump be in 09 or in 2010? And, if weather is unfavorable it may not occur at all.
Further, again talking without looking at whatever facts I generate, off the top of my head, we are going to see some cattle & hog liquidation. History indicates when June rolls around, when the economics don't fit....the cows start coming to town...more heifers will show up in the kill..this is lean meat....hamburger & if the consumer is not in good shape & if prices don't hold...more cows come to town & calf kill rises.
One other item which makes it additionally complex is natural gas. It is still relatively cheap & don't think it will remain cheap much longer. Means higher fertilizer costs down the road --talking longer term.
These are all unfounded thoughts at this moment..theory...will have more hard data tonight & see if my theory holds any water.
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Initial Quick Thoughts-acreage
