Schnitzel I am very sceptical of the information flows out of the US on grains. The last thing they need right now is inflation in food. They have been trying to talk down corn too. But the reality is that with the high costs of production for cereals, farmers globally will back the system off (ie fertilizer applications) to decrease risks unless ... you guessed it, prices rise. It is obvious that inputs costs are now settling at new levels and this trend will continue on the up if oil/gas trend higher too.
It is the marginal areas, ie the areas with more inherent weather risk, poorer soils etc, that will be cut from grain production around the globe and farmers will opt for low input systems. For example, annual pastures or in my case planting these areas to trees like sandalwood and PERMANENTLY retiring 'marginal' niches on my farm. Subtle changes but on a global scale it has to reduce output in 2006 unless ... prices rally!
I am extremely bullish for 2006 grain prices but wheat prices would have to double to stop me retiring the 'risky' parts of my farm from grain. Because input prices have essentially doubled in the last 3 years. Good luck!
There is an excellent farmer blog at the following website:
www.agweb.com
Looks for 'Comments for 2006'.
AWB Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
