Get ready for another run up in agriculture prices

The U.S. Department of Agriculture is out with its annual acreage report this morning, indicating how many acres farmers intend to devote to various crops in 2008. As you’re probably aware, prices for corn, wheat and various other products that spring up from the ground have been on a multi-year tear.

Today’s report shows that after several years of devoting more acres to corn (thanks in part to the government’s poorly thought out domestic ethanol promotion policy), farmers are switching over to soybeans and wheat. The estimated 86 million acres of corn, down from almost 94 million last year, came in even less than aggie experts expected. That’s quite bullish for corn prices.

Meanwhile, the fundamentals pushing up wheat and soy prices are still pushing despite even more acres being devoted to those crops. Wheat producers outside the U.S. are suffering from drought. Soy is in demand for use as a food and a fuel. Inventories of both are at historically low levels. So even with almost 75 million acres of soy expected in 2008, up from 64 million last year, soy futures prices are rising today. Soy prices hit a record of almost $16 a bushel at the beginning of March but traded off along with the rest of the commodity complex the past few weeks. They’re at $12.73 today.

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