Reply #22: On Foodstocks and Commodities / DailyReckoning

[Demeter]

Our commodities superstar, Kevin Kerr, recently went to meet with corn and soybean farmers (as well as feedlot operators) and he told MarketWatch , “the conversation was positive but also fearful.”

“The overwhelming sense of farmers here is that the average urbanite is unfazed by what farmers are going through. After all, costs for the average farmer are up more than 100%. Profit margins have narrowed or become non-existent and fuel costs, especially diesel, have been a killer.

“Farmers feel that the average consumer blames them and think the farmer is getting rich of these food costs; when in reality there are no yachts in Waseca, Minn., only farmers trying to grow their crops and take care of their families.

“The increase in input costs has been as big a burden on farmers as it has on the rest of us. The average person living in the city is relatively unconcerned as long as the water is running, they have a job, the ATM works and there is food on the shelf. Most urbanites are likely more concerned with who got the boot on ‘American Idol’ then the possible approaching food disaster.

“One thing is for sure, agriculture markets are not like other commodities, and demand and pent-up demand are real. This year, the corn crop needs to be a bumper crop or there will be a shortfall. It’s likely that we will have a low yield crop, and $7.50 corn is a real possibility.

“Corn-based ethanol remains the law of the land, and like it or not, nothing is going to change in an election year. All bets are off until we know who will be president.”