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Strategies & Market Trends : Bonds, Currencies, Commodities and Index Futures
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To: Chip McVickar who wrote (1224)2/22/2001 5:35:52 PM
From: Raymond Duray  Read Replies (1) of 12411
 
Hi Chip,

I've been intrigued by the talk hereabouts regarding the grain complex and I'm starting to consider the issues a bit. One of the things I'm keen on figuring out is the calculation that any sensible farmer is going to be making this spring as regards acreage to plant. While Ground Zero has contacted a Dakotan farmer who sees a good crop ahead, I've been contacting a Farm Bureau agent in NW Illinois and I'm getting some interesting feedback on crop inputs. Specifically, due to the shortages in NG, my contact tells me that he's expecting a 30-40% rise in the price of ammonia in the spring. Furthermore, he sees a similar 30% rise in the cost of diesel, YoY. So, with the current markets for wheat, beans and corn at or below breakeven, I'd say there's bound to be a lot of anxiety in among the producers when the planting season begins in earnest. I'm trying to do an economic back-of-the-envelope calculation of what a marginal player would think about avoiding the credit markets for the season, because of the perceived risks at current and anticipated price levels. I am leaning toward a view that, in spite of the current USDA policies to not pay for fallowing fields, that a significant reduction in planted acreage may be in store. Of course farmers, being the perverse gamblers that they are, may well feel that they have no choice but to plant to the fencerows in the hope that the next guy is out of the game.

I'm all ears to anyone who has heard of projections on cost of inputs and on anticipated acreages in cultivation.

Thanks, Ray :)
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