Crude oil, Dow Jones, and Soybeans:
Updated
Many things are currently driving the bullish Ag markets. Oil/energy are heavily weighted in providing this bullish enthusiasm. The supply and demand for Corn and beans will be directly and indirectly impacted by Oil/energy markets. Energy Markets have the potential to react hard and fast on diminishing economic data. A strong economy should keep Oil and Ag Markets elevated to potentially extremely high levels. A soft economy (using DJI as a gauge) moving into recessionary mode, will kill oil demand and take down Ag markets for some time as well (as it did in 08’). I don’t know for sure what to expect for our economy, sensitive and volatile ahead… 23’ Corn and Beans are in Pickle. Inputs are expected to rise considerably so naturally we want today’s Cash prices (or better) for a more expensive 23’ Crop. It’s hard to price something (23’ crop) that is $1-$3 below the current Cash Market. But when this drops, the markets won’t ask you for your costs of production before dropping… Don’t fall asleep on multiple crop years, especially if we see “Blow off Top” activity in Oil and old Crop Ag markets.
Note
My concerns are down the road with our Ag markets being tied to oil and oil having a delayed market reaction to strong pullbacks in the stock markets.High energy and high food costs takes money out of consumers pockets. Less money circulating in an economy built on the velocity of money movement can slow quickly. A weakened economy will slow or potentially kill oil demand as people travel much less when they don’t have as much money in their pockets for food and widgets. With corn and beans being tied to oil/energy more than ever, the backside of this could look ugly. Time will tell.
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