Doomsday Bill Is Now Bullish Bill

Published on: 09:25AM Aug 19, 2008
Vance Ehmke

Yesterday I had the good fortune to talk with Bill Tierney, former Kansas State University wheat marketing specialist. Back when he was here in Kansas, I always called him Doomsday Bill because he was so pessimistic about where the market was headed. Today, though, I’m changing his name to Bullish Bill.

After Bill left K-State, he moved to Washington DC and became part of the USDA team. Then he went into the private sector, and just recently moved over to LMC International.

Before I go any further, I should explain that I needed to talk with Bill because farm broadcaster Mick Kjar, who has a radio show in eastern North Dakota and western Minnesota, called and wanted to do a radio show on parity, the subject of my last blog.

I was sure Mick would ask what current parity prices were. So I figured Bill would know. And, of course, he did. For your information, the current parity price on corn is $8.6l/bu; grain sorghum is $8.62. Current wheat parity price is $l3.60 and for soybeans, it’s $2l.30.

At any rate, while talking with Bill, it quickly became apparent that Bill is a bull. He says while there are a lot of parallels between today’s explosive grain markets and those of the early to mid-70s, there are some major differences. “And as a result, there probably will be a leveling off period—maybe 2 to 3 years from now—but no collapse,” he says.

So what does this mean as far as Bill’s price projections? He’s saying next summer, US corn prices will go up and wheat will come down. We’ll also be feeding more wheat.

“Specifically, over the next 6 to l2 months, the corn market will take out the previous highs of $8/bu and soybeans will take out their old high of $l6.50.

“Further, this will all happen without any shortfalls in production caused by bad weather. Too, with the change in administration coming, there will not be time to create policies allowing early outs on CRP. That won’t be able to happen until the 20l0 crop.”

Bill is making these price projections partly because of the renewable fuels standards and mandated growth in ethanol production. But more important is the growth in per capita income and huge new demand coming from emerging economies in China and India.

So how does all this tie in with the old concept of parity? It’s rare that current market prices ever come close to what parity prices are, let alone equaling them. One of the few times that happened in the past l00 years was during WWII. But according to Bill, they’re shortly going to be doing it again. In brief, this is one of the most prosperous times you’ll ever see in your entire lifetime—right now.

And finally, your words of wisdom for the day come from my wife Louise. I asked her what she would do if Bill’s predictions came true and we wound up with a huge windfall in net income. “We’re going to pay off debt until there’s no debt left. We’re going to hunt that animal into extinction.” Sounds like a plan.