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I see a bubble itching to expand just a little more than then burst. Agriculture is like every other business model. I've heard my whole life the rules have changed. Land prices in the 70's, corn in the 80s, dot com in the 90's, and housing this past year. Corn is driving beans, and oil is driving corn. Steel is driving oil. The house is crumbling at its foundation though. Milk has already peaked, hogs are imploding, and I cant see cattle holding much long with the amount of red ink the feedlots are swimming in. Particularly with loads of cheap pork on the market. If the livestock complex collapes then crops and oil are the main games in town. The dollars fall has put at least 30 dollars on the price of oil. The war premium and concern over conflicts in the middle east and north africa at least another 25. Doesnt matter who wins the election, the people want the troops home so expect peace to break out next year. Add that to a recession, and a real one at that and watch the oil complex unravel. After all no trader wants to own 94 dollar oil when the price drops to 70. I read today that in December the economy didnt just slow down, it contracted. Looks like a repeat of the 70's to me. Doesnt matter if its Russia or ethanol driving corn prices. More similarities, radical run up in land prices as the twin forces of an inflation hedge and rising crop prices drive that market. Recession plus high energy equals stagflation where the economy isnt growing but inflation is. Banks throwing money around (its coming, the fed is auctioning money now since no one wants to come buy it). A couple of years, at most and the house of cards starts to collapse. I see cattle next, then milk. When milk gets back under 14 dollars all those dairy cows start hitting the kill market just when beef expansion takes off. Finally, the fed is faced with no choice but raise rates. The inflationary component is worse than the stagnation (repeat of the early 80's). The ag markets and land markets collapse. Oil drops like a stone. Then we see an economic turn around. When the experts start saying a business cycle has changed, run. A wise man once wrote "there is nothing new under the sun". I started farming in the early 80's. There were 100 kids in FFA my freshman year, almost all from small family farms. By 1984, we had gone from 475 dairy farms to 26. By my junior year we had 28. I bought my farm in 1987, for 1000 an acre and it had been on the market for a year. It had been worth 3 times that 6 years before.
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