Thursday, June 12, 2008

Runaway Grains, Never Coming Back

Looks like this corn crop is toast, and the other grains could be in trouble too. High input costs (diesel, fertilizer, etc) are really hammering farmers and their motivation to replant crops this late in the year.

I ponied up for a wheat and a corn contract last night. A little bummed I got into corn so late, but I got stopped out a month ago fair and square - it happens. All we can do is look ahead, and looking ahead now, the upside seems to far outweigh the downside. No telling how high the grains can go - we may be on the verge of a global famine.

Given this, as we've discussed before, meat prices must rise - no way around it! The cattle contracts look especially attractive. Both lean hogs and pork bellies already have premiums priced in for the distant contracts, but I'm not seeing that in the longer term cattle contracts.

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