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Bryan Doherty: Buying acres now?
As supplies tighten, commodities may compete with each other for acreage. With the recent sharp rally in wheat prices due primarily to drought conditions in Europe and Russia, wheat futures have made a significant advance, and are looking to attract producers to plant more for 2011.
In fact, there are many U.S. producers who did not grow wheat this year, instead opting to grow beans, corn or cotton. With new crop July (2011) Chicago wheat prices trading over $7.50 per bushel, and new crop bean prices trading over $10.00 on November 2011 futures, we believe the market is telling producers now they should look at planting wheat and double-cropping to beans. In turn, corn prices may be finding some upward price pressure from this development, as December 2011 peaked at $4.50 on Thursday of this week. We believe that figure represents a premium for corn and, in turn, is now trying to buy acres back from beans.
A fight for acres does not occur every year. As supplies tighten and the market focuses on different supply sectors, the invisible hand of the marketplace will push prices to a level that attracts enough farmers to shift production. This could be a very interesting year ahead, as the world grapples with tightening coarse grains as well as oil seed supply. Stay alert and look for those opportunities. Often, they come early and then leave just as quickly.
If you have comments, questions or suggestions, contact Bryan Doherty at 1-800-Top-Farm, Ext. 129.
Futures trading is not for everyone. The risk of loss in trading is substantial. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Past performance is not necessarily indicative of future results.