Next Bubble Reprise

Last September I pondered what the next bubble would be for the U.S. economy. More people have spoken to me about that post than any other I've made.

In the post I mentioned a friend who was planning on farming hay as a crop because she saw a shortage of hay as a growing trend. It wasn't something I could validate, but it sounded plausible. Last week I was speaking with a colleague about the post and I got a little validation. She lives in the St. Louis metro area and owns horses, and she has noticed that hay is becoming harder and harder to find. In fact, the local rumor mill has it that one of the primary local suppliers is hoarding hay (out of a desire to make profits or a concern over running out I did not ask).

That led to a search, and sure enough, hay shortage. There's this line from the Mississippi State University Office of Agricultural News:

Livestock producers saw it coming, but the hay shortage is forcing some tough decisions that may have long-term repercussions on the health, performance and profitability of their animals.

Hay shortages are not new, they come and go. And the current shortage seems to track back to a dry summer in 1996. Herd animals all across the country were slaughtered due to a lack of feed. Do a search for hay shortage and you will find more than a quarter million results.

Rainfall has a big impact on hay yields, but so does that amount of land dedicated to growing grasses. As long as the green gas bubble continues to build there is going to be less financial incentive to plant grass. Farmers also used corn as a feed-substitute during hay shortages, but with ethanol production driving up corn prices that is no longer an affordable alternative.

Our economy can defy simple answers. It doesn't mean you don't act, change is good and needed. But having everyone suddenly rush to one side of the boat gets us all wet. So ethanol crops are still a candidate for the next bubble, but I am keeping my eye out for others.