Chore time for me isn't what it used to be when I was growing up on our eastern Iowa farm, but taking care of two horses in the morning before I head in for work gives me a little time to think about the day ahead. Each morning, stop at this spot to get a feeling for the "tone of the day" - and some attitude about agriculture and the markets.
I was thinking…
... welcome to 2009!
If you've already heard that too much, I apologize. But everybody deserves a welcome to the new year and I'm happy to offer one, too!
Much like the start of 2008, the markets are focused on the "outsides" -- crude oil and the value of the U.S. dollar in particular.
Much like the start of 2008, traders are wondering about soybean production potential of Brazil and Argentina. And this year, the market is also concerned about corn production potential in both of these South American competitors.
Much like the start of 2008, investors are wondering where they should be putting their money. And while the Dow is well under the level that started 2008, stock prices were already well off the highs at the start of 2008 and equities were "falling out of favor" with investors.
Much like the start of 2008, input costs for U.S. producers are higher than year-earlier and traders are wondering just how much impact that will have on your acreage decisions for the year ahead.
Much like the start of 2008... well -- you get the idea. There are many areas where the start of 2009 differs from the start of 2008, but there many (MANY) similarities between the start of this year and the start of last year.
That doesn't mean we should expect 2009 price action to replicate what we saw in 2008... but it does mean the potential for that does exist. First on the list of items to check off in 2009 is figuring out where investors are likely to put their money for the first quarter of 2009. Next on the list is figuring out the production potential of South American corn and soybean crops.
After that... we need to figure out just how higher input costs will impact the acreage mix in the U.S. for 2009. We also need to figure out when the corn market will finally realize that steady-with-year-ago acres isn't enough acres for 2009 -- that would point carryover solidly under 1 billion bushels and likely force another season of rationing.
In the livestock markets, the start of 2009 is different from the start of 2008 in one very important way: Beef and pork production are expected to trend down throughout the year starting now. If demand (domestic and export) can hold close to steady, tightening supplies promises a brighter pricing picture for both cattle and hogs in the year ahead.
So... Happy New Year! Now... let's roll up the sleeves and figure out what these markets need to know to get 2009 started!