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Central Missouri | Or Is the govt manipulating the numbers or is it just plain economics of a commodity where prices always gravitate toward cost of production?
I would suggest that its just economics.
Grains, all commodities in fact, go through eras of price. In the grains i would suggest that each era has 2 periods.
When you look at box A below the era of price between 1972-2007 was brought on by the russian grain robbery. It reset price such that the highs were higher and so were the lows. Correspondingly inflation kicked in and cost of production went up.
The first half of that era ( the increased demandhalf) outlined in red 1 had more frequent highs and less frequent lows. The first half lasted 17 years roughly.
The second half of that era (the oversupply half) outlined in yellow 2 had lower less frequent highs and spent more time at low prices. The one outlier was 1996. The second half lasted roughly 18 years for a total time of 35 years.
That era of price ended in 2008 as outlined in blue box B mainly due to chinese demand driving up price. 2008 plus 17 is 2025. This era is outlined in red box 3. This imo is the demand half of the era we are in. Is it coming to a close? I would argue yes due mainly to overproduction caused by south america. The world eventually outproduced the extra chinese demand. The world did this because of the increase in supply. We have also seen increased inflation drive up our cost of production.
So are we entering the second half of this era in price outlined in yellow box 4 where supply in general is greater than demand? I would suggest that we are and that history repeats itself and that commodity price gravitates toward variable cost of production.
If history repeats grain prices should have less frequent highs. The highs in general should be lower and prices will gravitate lower as they did in yellow box 2. Most highs in the second half of the price era are supply driven. Selling multiple years when we get price spikes up will probably be more important due to their lower frequency. It is possible that price has a demand shock like 1996 during this era. If that should occur it will exacerbate lower prices in the following years.
This is all based on price history of grain commodities repeating.
I COULD BE WRONG! JMO
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Is it Trumps fault? Sure why not!
