Vancouver Investment Advisor Ritch Wigham

Agriculture: Questioning Crop Outcomes in ’09

Part 1 of 3

It is update time:

There are three key areas that I want to bring up from the discussions I have set forth recently:

1. We need to talk seriously about agriculture now that the crop has finally been planted.
2. The oil and gas sector and what is to come from here.
3. Potash One, why this junior is on track for bigger and better.

Starting With the agricultural sector, we find that our concerns with this years crop outcome is being reflected in the market place already. Follow this link to see a related wheat chart.

As you can see from this chart of the “new crop” December wheat, we continue to have very strong price appreciation. This is also true for ‘beans and corn. I cannot strongly enough re-iterate my concerns with the eventual outcome of this years crop. If you use only a small percentage of your liquid assets in one speculative trade this year it should be in the Ag complex. So far it has been shaping up as I had feared with much cooler than normal weather in the growing areas and much wetter in some of the areas (Illinois) that are critical to the overall yield come harvest time. Suffice it to say that according to the latest USDA, NASS planting progress report of June 1st all of our primary food/feed crops(Wheat,corn,soybeans) are well behind their five year planting and germinating averages, with some areas quickly running out of the precious time it takes to either switch crops or to re-seed if that is necessary. This situation is not dissimilar to last year, but remember that it took near perfect growing conditions to fix the crop after the awe full start that it had. I am very skeptical that two perfect growing seasons in a row can be anticipated after the much worse than normal start that we have had again.

At this point the only real questions that remain for seeding is how much of the corn and wheat will be switched to soybeans. To me soybeans can very quickly become a default crop for a lot of growers as you can plant them later than corn, they don’t require the same levels of fertilization as wheat or corn and the tightness of supply that is going to be available from Argentina and Brazil seems to keep getting smaller, which has been what has caused a lot of the price support for the bean complex. The Chinese would normally have switched to import SA(South American) beans by now but appear to still have an import appetite for American beans.

All of which will probably result in a number of millions of acres being switched to beans from corn and wheat. Some estimates have this as high as three million acres. I look for any surprises hear to be on the side of the switch and could see this number even higher.

Look for part two tomorrow on the crude. (Update: Crude oil report now available.)

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