essays pieces of the puzzle
Wednesday, December 19th, 2012
weather markets

12 1219 grains

This chart surprised me.  Given the onset of “weather markets” in June and July, I thought the grains would have looked better than this.  As it is, wheat is unchanged since the start of last year and beans are up modestly.  Corn has done the best.  (For perspective, Deere was up 7% during this period and the S&P 500 was up 18%.)

With some prime growing areas devastated by drought, it would be natural to think that the price momentum would have continued.  But some Upper Midwest land produced good yields despite generally dry conditions.  The global supply/demand conditions, which are beyond the ken of this observer, did not lead to a follow through.

But if you’re looking for wild cards for 2013, look no further.  Farmers are worried about subsoil moisture and any hint of the return of those weather markets could disrupt not just the grains but other asset classes (and economic readings) too.

One thing has remained hot — farmland.  Land price records are being shattered day by day, despite the low current returns available on that land.  If it’s not priced for perfection, it’s priced for continued wonderfulness.  Maybe that will be the case.  (Chart:  Bloomberg terminal.)

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