I'm calling it bad news...
Overall, I think the early April Fool's joke published yesterday by the NASS has ominous implications. I'm not talking about the plummeting soybean prices, either.
We are on a collision course with rampaging demand toward letting down our corn customers. Every day from now on that corn planters are not rolling increases the likelihood of demand-choking prices for our customers. The need for widespread perfect weather this growing season just moved up a notch too.
Hog producers who have been vainly trying to avoid flooding the market with sows have some tough choices to make. Ethanol plants which are already on the borderline of profitability have a bleaker outlook.
Fertilizer and seed companies overplayed their hands, I think, as the pricing power of the handful of major players led them to believe they could predict exactly how much blood they could extract from growers before the patient collapsed.
They missed, and 2009 now looks much murkier as well. While soy prices no longer represent the slam dunk they looked like a month ago, shrinking margins on corn have raised the adrenaline level on too many producers to allow bold switches to more corn.
I had always assumed that if I would grow corn for $120 gross profit (revenue minus rent and variable expenses) in 2006, I would settle for doing it in 2009. But some behavioral economic trigger seems to be focusing on the increased risk of larger numbers. In short, I need a similar percentage profit - not absolute profit to get excited.
Going from $350/A costs to $650/A costs does more than make my spreadsheet columns wider. It dampens enthusiasm until the brain adjusts. Corn prices will need to reach demand-killing numbers to calm those worries. Such numbers would be a temporary thing.
We'd better hope the economy pulls out of its nosedive in time for fuel and food demand to stabilize. And don't get me started on what a nasty bout of serious inflation could cause.