This time of year you can usually find me inside my combine cab busily bearing down on six rows of corn.  As many of you know my day job takes me to the farm fields of Chatham-Kent and South Lambton county.  I’m on schedule this year, maybe a week early because of the tremendous dry August we had earlier.  One thing about agriculture is every year is different.  While last year may have been wet forcing a late harvest season, this year was dry and early.  As my friend Forrest Gump once said, it sort of like a box of chocolates, you never know what you’re going to get.

Okay I realize I paraphrased that old saying.  I think sometimes when you’re involved in agriculture the uncertainty of the situation becomes the new normal.  The risks that farmers take are huge but when you’ve been involved with all your life, it seems normal.  Having said that the last few years in southwestern Ontario farm country have been pretty good.  I like to say it is what it is, but it is largely due to the world’s insatiable appetite for commodities.

For those of you who are reading this from an urban location you might not have the same appreciation for commodities that we have in a rural area.  For instance in rural areas of southwestern Ontario the last few weeks have been full of farmers hauling their commodities, corn and soybeans.  It is one thing to think about that and then it’s another thing to think about the other commodities like gold, silver, copper, oil and a whole host of others.  With the world recovering from the 2008 crash in equities, there has been huge amounts of capital invested in world commodity markets.  This has led to huge volatility in world commodity markets as much of the world’s money now holds some type of contract position within these markets.

There are a whole host of reasons for this, much of it simply a case of money piggybacking on the commodity bandwagon.  One commodity I often like to follow is the price of gold.  For instance, gold is a commodity that has a certain raison d’être in this world.  When the financial world is full of uncertainty, money rushes into the gold market.  For instance gold was priced at $1349 today as the US dollar continued under pressure.  The simple fact is almost any negative headline sends money into gold.  It is looked at as always having a tangible value in troubled times.  So in 2010 with gold reaching these levels, our times are obviously troubled.

Of course another reason that commodities are seen as being very hot has to do with the developing economies of China and India who are perceived as having an insatiable appetite for many of these commodities.  I remember one time I had a meeting with a soybean buyer in Singapore.  I didn’t know much about soybeans at the time except that there was always a large amount of Ontario soybeans that ended up in East Asia.  On meeting the soybean buyer at the Marina Mandarin Hotel in Singapore, he told me that every day in Asia somebody sits down for some soybeans.  Of course in North America we sit down for coffee toast and cereal.  He told me our Asian friends sat down for some soybeans, it struck me we might have something here.  There are a lot more Asians than there are North Americans, making for a burgeoning soybean market.  Needless to say, with soybean prices rising, China continues to import soybeans.  Their appetite for soybeans almost seems insatiable.

One of the hottest commodities now is cotton.  It’s something that we don’t think about much here in Canada because we don’t have any.   A combination of things have gone wrong, floods in Pakistan and hail storms in Texas have sent a supply shock into the cotton market.  This has sent cotton prices soaring as the market tries to find a price which will ratchet demand.  What’s interesting is one commodities price spike usually affects another.  The cotton market is affecting the corn and soybean market because land used for cotton can also be used for corn and soybeans.  So these commodities are competing for future acreage.

This is all taking place in a global economy that still has not recovered from the financial meltdown in 2008.  The question I have is what happens to the commodity market when the global economy finally gets healthy again?  It’s a tantalizing scenario.   We’ll see what happens.  More commodity price spikes will bring their own problems.  It’s a fascinating watch.