Corn Vs LinkedIn: Noncommercial Money and Delayed Plantings

Delayed Ontario PlantingIt has been very frustrating spring for Ontario farmers.  I know that there have been tremendous problems in Manitoba with flooding and nothing can really compare with that.  However, in Ontario weather has caused widespread delay in the planting of the 2011 crop.  I will have been shut down for over a week by the time I get planting again.  Widespread rainfall and cool conditions have certainly made the spring of 2011 very challenging.

Ontario is about 50% planted into corn. There are some areas of the province, which are close to 100% and others that haven’t started yet.  Soil type and rainfall totals this year have been instrumental in the delayed 2011 plant.  1997 is a spring that I remember to be very wet, with me finishing up soybeans on June 14th.  I don’t want to go there anymore than anybody else.  Let’s hope that the weather clears and the Eastern Corn Belt, Ontario and Québec producers can get the crop in the ground.

It has been an interesting week on the markets as all this wet weather has led to some increased prices in the grains.  Needless to say, it is not all about delayed planting in the eastern Corn Belt, as drought in Western Europe continues to give the market jitters.  This was accentuated this past week when the Ukraine decided to tax grain exports in 2011 somewhat like our Argentinean friends do from time to time.  Add the weather woes into the equation and suddenly the fundamentals matter.  The corn market wants all the corn acres we can plant. So the December 2011 corn futures have been fluttering close to its all-time levels.

I just want some sunny weather and for my fields to dry out.  Hurrying up and waiting is never good for your soul, at least not for my soul, but it seems when you are in the farming business, you do a lot of that. Dodging the raindrops this spring, at least in southwestern Ontario has been job one.

So with our agricultural commodity prices rallying over last week, the question comes up whether we have the top in or was the top a few weeks ago?  Has all the noncommercial money that has flowed into agricultural commodities become somewhat fickle in its behavior to consistently stay here?  Or has the temptations of a rejuvenated stock market seeing the money go back into the equities?  These questions are certainly top drawer as I look over my marketing plan going into June.

I say that today because I was extremely interested in the IPO of the LinkedIn Corporation, which was traded today on the New York Stock Exchange.  The initial public offering price of $45 a share was quickly wiped out when it opened at $83, surging to $222.70 in morning trading and then backing up to $94.25 at the close.  This put LinkedIn into a select group, it is one of only seven US listed stocks since the craze to double its IPO value in its trading debut.  According to the Globe and Mail, this stock value gives the social networking company a capitalization of $9 billion on annual revenue in 2010 of $400 million.  The stock is priced at more than 1300 times the earning based on the 2010 financial results.  So what should noncommercial interest buy, corn or something like LinkedIn, a social media company which is the latest rage.

For those of you who are not familiar with LinkedIn, it’s the preferred social media creation, sometimes called the Facebook for professionals.  Yours truly has been on LinkedIn over two years now.  Many of you know I am on Twitter as well.  The bottom line in 2011 is the social media companies despite their lack of profits have investors salivating somewhat like the crazy days.

I’m not saying that noncommercial interests can make a lot more money investing in social media startups vs. investing in agricultural managed futures.  All I am saying is that LinkedIn is a good example today of the constant temptation among non-commercial interests to move out of agriculture into things which have fast returns.  Even though our agricultural commodities have seen huge gains over the period of the last 18 months, surely there are many investors who might be saying they can’t go much higher.

I know for myself I am finding it fascinating what the movement of noncommercial money is doing to our agricultural commodity prices.  There is no question now fundamental demand for corn is extremely strong, with some old crop demand raising basis bids to unprecedented levels on the fringe of the Corn Belt.  In fact in Ontario over the last two weeks we have seen a substantial increase in corn basis.   Add the fickle nature of noncommercial demand into the equation and it gets that much more volatile.

Key of course is getting that crop in the ground to take some advantage of present market conditions.  We all knew it wouldn’t be a repeat of 2010 this year.  However, most of us I don’t think thought we’d be part of the story regarding planting delays and higher prices.   I certainly didn’t write that chapter, and I certainly don’t want it to end that way either.  Let’s hope planters roll next week.