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| I don't have it all figured out but it will work out. Your post got me looking at the WASDE numbers for wheat... In 1972/73 we planted 54.9 mil acres to wheat and raised a crop of 1545 mil bushels.. by 1977, four crop years later we added 25 mil acres!!! That's right from 54.9 to 80.2 and by 1982 we pushed the acres out even further to 88.9 mil acres.. 34 mil acres more than we planted in 72/73.. and almost doubled the size of the crop to 2793 mil bushels. That year we exported 1773 mil bushels of wheat... exports were the driving DEMAND force back then.
This year... USDA says we'll hopefully export 900 mln bushels of wheat... after planting 57.3 mln acres. The rest of the world has taken over the wheat export market today.
The demand force right now is domestic consumption of grain for ethanol. This demand is pushing up the world price of grains on the CBoT... demand in this country is on fire... which is pushing up world prices... and you know what?
The world is going to respond.
I think over the next couple of years as world production explodes our exports are going to fall... which will bridge the domestic consumption gap. Grain that would have gone overseas will stay home and be processed into energy... more acres will come online as they did in the 1970's.
For example we used to do a lot of double croping of wheat and grain sorghum back in the 80's... it was a lot of work and after they changed the farm program so we didn't have to protect our base... we stopped. However, three years ago we started again and now a quarter of our acreage will be double cropped next year.
I don't know where all the acreage will come or how it will shake out... I just believe that like in the 1970's/80's higher prices led to higher production... which eventually led to lower prices... In 1972/73 exports exploded... In 1974 ending stocks of wheat fell to 247 mil bushels... by 1982 average prices hit almost $4.00 (when $4.00 per bushel could buy something) By 1986 ending stocks hit 1905 mil bushels almost 8 times 1974... by 1987... prices were back to where they were in 1972.
So enjoy it while it's good. Below is a good discussion about the 95/96 rally... Corn prices rallied in July of 1996 to $5.54... three months later... three dollars lower... $2.65.
My point is that in the 1970's the demand/price surge was slower and lasted longer... those who want to spike prices now... will kill demand... and hence the rally... sooner.
just my $.02 | |
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My BIG question
