Everyone is Expecting Inflation!
Mar 01, 2010
While it is cold and snow is still on the ground, spring is just around the corner. I know for many of you it cannot come soon enough!
Last week talk about the growing concerns of a potential delayed spring planting started to surface. While one can talk, I really believe it’s still too early to get excited. I think the real action this week will be traders starting to get in position for the March supply and demand report. Will there be a major revision in the January production numbers?
The second variable everyone will be talking about is the outside markets. Essentially, it appears things are going to get really rough in Washington as the battle lines are drawn on the health care debate. On my travels the last few months, I’ve met few people who like the directions things are going. A general theme is everyone is expecting inflation, a reduction of standard of living and higher taxes; not what you call a bullish attitude about the future. I believe this negative tone will continue to plague the markets for most of 2010 and well into 2011, which leads to the real problem: if consumers are worried about the future, are they going to continue to spend at a very slow pace? Granted, consumers will increase savings, but overall debt has become a four-letter word to many.
While the outside markets, ethanol and the opening up of China caused the 2008 and 2009 price event for agriculture, I have to say I don’t think the fundamentals are in place as far as we can see into the future for a resumption of these exceptional prices. All we have now is weather. Granted it’s a powerful variable, but it has to be bad and normally this hurts farmers more than helps, in that, a drop in yield drop is usually worse than a flat price rally potential.
The overall game plan is to take advantage of rallies into April/May to sell the 2010 crops and a rally in June/July to sell 2011 if we see the weather event.
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