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Advisor
Posts: 3,952
Registered: ‎05-03-2010
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Re: Floor Talk April 27

Luis Vieira, Successful Farming freelance writer in South America files this round-up:

 

A lot of news related to the weather in Argentina have generated some hope for the grain market. But still, there is an expectation of a huge crop in the country and no different is Brazil. According to the Buenos Aires Cereal, Argentina's soybean output would be 56.5 million metric tons and the projection for corn output increased to 37 million metric tons.

In Brazil, the National Supply Company (Conab) says that total corn output would be a record of 91.46 million metric tons, considering the volume harvested in the summer and to be harvested during the winter. But the economic scenario is the key. Corn is being paid in major production regions less than a third of what was paid in January - from around R$ 30 ($9.52) to R$ 23 ($ 7.30) per bag of 60 kilograms.

 “This context is justified by the good expectations with the second corn crop, the reconditioning of the volume produced comparing to 2016 and inconstant demand,” explains Cristiano Palavro, technical consultant of the Association of Soybean Growers of Goias.

Frederico Schmidt, an analyst at Priore Investments from Curitiba, says that farmers from the Brazilian state of Paraná are selling just very isolated batches of corn. In the case of soybeans, prices are a bit more attractive.

"In the case of soybeans, Brazilian farmers already noticed that prices won't come back to the levels of last year. This week, there was a peel of some deals, but naturally, the sales are slow. Just retaining would bring some punctual highs," explained Schmidt.

In Argentina, added to low grain prices, there is the problem of a stronger Peso. Data from the Center of Cereal Exporters already show a trend with US$ 37.7 billion on grains exports so far in the year – 36.06 percent less than the same period of 2016.

For Delfín Morgan, director of the brokerage Morgan García Mansilla, the scenario is clear: "A lot of farmers will wait as much as they can to sell in Argentina," stated.

 

Mike

Senior Advisor
Posts: 1,004
Registered: ‎05-20-2010
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Re: Floor Talk April 27

[ Edited ]

I'll give you that point Ray, but you should give me/us  the point that the corn market is extremely complacent. Basically no weather premium in a market where the 6th highest yield in history (160 or so)  will cause us to run out of corn. Maybe it takes until 2018, like the 95 crop did not get priced right till 96, but there is zero room for a below trend yield in the corn biz. 

 

I read where farmers need to be aggressive sellers above $4. That is truly horrific advice. IF it gets above $4, it might get above $4.50, and do it in a manner of days. At least wait for the 7th week of the rally for goodness sake. Commodities don't come out of multi-year basing patterns and then only rally 40 cents...

 

How do I get to such a conclusion, well just look at the Purdue S/D numbers, 

They use 90 mil planted, 82.7 harvested, with a yield of 170, which is someone's trend calc.

How about perspective, 170 is the third highest in history, or it is 98% of the highest ever. That is NOT a conservative estimate.

 

A, I'll say, educated, estimate is a modified Olympic average: exclude 2012 and the mean from 2010 forward is......

ONLY 161.9.  This would be an average crop basically. 

This would get only 13.3Bil of a crop. Carryout right at only 1 bil. And corn prices well north of 4.50.

 

Point is, for our farm, we don't sell when the buyers are complacent. Users are not covered in the least with not a care to even think about it. Specs just about as short as they have been in 3 years...

 

Anyone who implements that "Know your COP and then sell at a profit" mantra is likely to get what ignorance deserves.

Veteran Contributor
Posts: 79
Registered: ‎07-04-2011

Re: Floor Talk April 27

[ Edited ]

That is kind of a cheap shot response by Ray in my opinion,  maybe a guy who bought calls on the break is just looking for a 15 or 20 cent rally to make cash sales.  It might not be the best marketing plan but corn prices right now are below insurance guarantees.  The journey of a thousand miles begins with a single step and a $1.00 rally in the price of corn could start with $0.15 in the right direction.

Veteran Advisor
Posts: 885
Registered: ‎05-13-2010
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Re: Floor Talk April 27

Let me explain my statement.....

 

To get a really strong rally, we need the funds to maintain or even increase their short positions.......don't need a quick to fizzle short term rally that causes the funds to nibble away at their short position.......we want a BANG when it happens, and this really isn't the best time of year for that to happen.....

 

to get that $1 rally, we need the funds to stay short and keep the farmer on the sidelines

Veteran Contributor
Posts: 82
Registered: ‎05-13-2010
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Re: Floor Talk April 27

Funds are in a pretty big short position. Grains are at baseline low, looking at the last 10 years.  Farmers on the run, trying to make numbers work.  I think SW is right on his wheat call.  Freeze or no freeze.  Exit door is small when there are alot of people ahead of you.

 

Rallys happen when you least expect it!

 

 

Honored Advisor
Posts: 7,312
Registered: ‎07-18-2011
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Re: Floor Talk April 27

Geee whiz......., TIME.

 

How do you ever expect great advice like that to find a home when you finish your point with a slap in the face to every farmer who is trying to survive this battle by controling their costs...???

 

message delivered......... any farmer keeping good records is an idiot when it comes to marketing.

 

The guys you have left for an audience don't market much.

Senior Advisor
Posts: 1,004
Registered: ‎05-20-2010
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Re: Floor Talk April 27

sw...I have been trying to share for my entire life that cost of production and marketing are not related. They are entirely different mgmt topics. It is not a slap for any farmer, it is a slap at the "experts" who continue to harp on it. I suggest that COP should be managed by an entirely different person that the marketing.

 

One business goal is to reduce COP. Entirely different goal to maximize selling price. Not at all related. No slap against a farmer, just a slap at the ludicrous concept that is pushed as a good management practice.

 

When I worked at GE Plastics, it cost us 4 cents a pound to make Lexan, we sold it for from 40 cents up to $14 a pound based upon its value to the users. Nothing to do with cost.

Honored Advisor
Posts: 7,312
Registered: ‎07-18-2011
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Re: Floor Talk April 27

All I am saying is you need to say it in a palatable way.

 

It is hard to get anywhere with a comment like that and an audience that understands that the only thing they can fully control is COP.

 

Marketing tools are important.  But you just told us that we should wait on a trend to mature...... Yet many of us passed up 4 sell opportunities last year waiting on a trend to materialize.

 

When a producer changes technique or crop and clips $50 an acre off his costs.  He adds that to his bottom line....... he has that under control..... and it totally affects what he considers an acceptable pricing point.

 

You are talking about selling decisions.  I am talking about marketing strategy.  COP is critical to deciding what we have for sale and how much.  

 

Even in the corn belt, profitability drives most production decisions.  Marketing follows......

 

Your audience has to deal with the bigger picture and statements like that .......... well are condescending and become the memorable point in what probably was a goodpresentation of pricing strategy.

 

COP limits sales....... It does not,  all sell,  whether they want to or not.  Of the farms I account for, less that 2% hold grain over 6 months... regardless of price. And if they have been in business over a year they know the futures price is not based on COP.  They are not fools.

But what they have for sale and how much is totally COP based..... Wheat is the most obvious example now..... Acres at record lows, harvested acres at record lows resulting in lower production all driven by COP  not the futures price...... If wheat could be produced for $1.50 a bushel COP those factors would not be true at $2.50 wheat futures.  COP drives futures long term.... and wheat will survive because world wide it is cheap to produce but not necessarily in the US.

COP drives supply in the US.   Until our lobbyists get us a subsidy similar to milk then COP will drive the subsidy.

 

Honored Advisor
Posts: 7,312
Registered: ‎07-18-2011
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Re: Floor Talk April 27

Lexan  example is so skewed profitably that price does not limit supply.   It is not an open market example of a product that has no patent protection or supply control outside of profitability.  Your audience figures that out as well.  apples and oranges  ........ There are very few examples of open market system outside of commodities.

 

If it is apparent you live in their world, folks listen better... 

Highlighted
Honored Advisor
Posts: 7,312
Registered: ‎07-18-2011
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Re: Floor Talk April 27

Time your one of the best I've read 

 

We are just discussing where a disconnect  that divide sellers and advisers.

 

The guys most consious of COP are the ones that need to here marketing strategy..

 

The real divide actually comes with the uncontrollable variables in production...  we don't need more division...