Today the prospects of a drop as big as 1988 have already sent prices about 50% higher since June. The difference of
course is the markets are much more sensitive now to supply shocks. I'm not an
economist (my standard excuse) but from what I can tell it has a lot to do with
low stocks, which in turn has a lot to do with ethanol and other inelastic
sources of demand. So the question about a new normal is also partly about whether the market situation is the new
normal. I'll leave it to the real economists to answer that one.
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We had huge stocks of government owned grain reserves going into the 1988 drought. Low stocks and inelastic ethanol demand this time...explosive.
ReplyDeleteScott Irwin