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| To me the folks with the most freedom to just turn off the business will do it first when input prices are not supported by finished good prices. So what's easiest?
Exports - grain gets too expensive for foreign buyers so they seek other sources and/or alternates
Processors - high grain price not supported buy finished good price, it's not easy or instant, but it doesn't take long to send workers home and shut off the power.
Livestock because live things don't 'turn off'.
However, there are no rules that say that it has to go in this order - if our high grain price is not high on the world market, export demand will continue and possibly push grain prices higher to get sales. If folks are happy paying $4/gallon for ethanol or $10/box for cereal, then processors have no reason to quit. So the market pressure could fall and has fallen on the livestock producer who will respond by shutting down, but it takes time (maybe shortest for birds - 3 months? hogs - 6 months? cattle - ? cattle have been 'shutting down' for several years now.
The market doesn't have to play to our version of fairness, but in the end is ultimately fair in determining price and therefore production opportunity. | |
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Demand Destruction - Ethanol Blinks First?
