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Advisor
Posts: 3,916
Registered: ‎05-03-2010
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Get a spoonful

So, I checked in with my favorite market source in Chicago. He opines on today's market action, the future picture of the ag markets, and where will all of these crops go, regarding this year's season and others.

 

 

In his own words:

 

"There is large demand... and the world market relies on Ag policy and production of a bunch of other countries more than ever before.. US is losing market share as we are not expanding acres.. and it takes the employment of expensive technology to acheive these high yields.. so a lot could change in a short amount of time if SA has a poor crop... or Argentina decide to slap export taxes back on corn and wheat etc...
US is 38% of the world soybean production so lose 8% of the SA bean crop and you would wipe out the US carryout..and rally beans 2 to 3 dollars..
 
But everything looks good there to start their growing season.. and China.. well they are in the process of changing their policy to un leash a years supply of corn stocks.. so they sit about 70 cents above the world market.. around 30 dollars a ton above US offers right now..
 
We are below cost of production and relying on subsidy but unlike other farm programs this program is very stingy.. it allows for subsidy to avg lower with prices.. It allows for a readjustment of rents and land.. or at least that is what it will induce if prices stay lower..
 
Farmer is in ARC-County which is 10% shallow loss coverage of avg revenue.. and will get reset lower next year.. and revenue insurance will be established in Feb.. today Dec 17 corn  is 3.93... figure break even for farmer is around $4.00 a bushel.. with an avg basis of -26 under figure it takes 4.26 -4.30 futures to get to break even for the avg tennant/ leveraged farmer..
 
Farm equipment sales take the first hit as farmer cuts back and takes depreciation for a year or two or three.. then land prices and rents will start to relent.. that is happening already in fringe areas.. especially in wheat country..
 
We suppose at current prices  we will see a 3 to 4 million reduction in corn acres.. but perhaps too many bean acres if SA is successful this winter..
 
I am selling this rally today.. 9.80 is top of my expected range and 3.30-3.70 is lead month range for corn.. fearing higher yeilds in beans before final count is over in January..
 
Strange moment with farmer in the field grain not moving that readily.. and option expiration next week supporting prices.. bean oil a bit squeezed for the moment before crush comes on line while bio D consumer is moving aggressively to cover RIN obligation before losing the dollar tax subsidy again at end of year.. that may get re stated later in the year."

 

Mike

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Senior Contributor
Posts: 204
Registered: ‎08-02-2012

Re: Get a spoonful

Agreed we've been saying this for the last five years at least we're all in the same page now. However clearly stated in the previous statement you would sell $3.30 corn for a loss of 1$ a bushel per acre??? Just some quick math here that's -200$ an acre well you and many others would be done after a year of that non profit. Hope everyone is staying safe and dry out there this season gl 🙂
Honored Advisor
Posts: 13,790
Registered: ‎05-13-2010
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Re: Get a spoonful

This summer, bins were put up around here with the intent to use them, elevators are full of beans..but they`re always full of beans this time of year. Cash bean price of $9 is sure a nice surprise of the threatened "$7" of last winter prognostications.

 

There`s stories of farmers actually buying new machinery just to push their payment to one year from now, but I haven`t seen it.   There`s still money to tile, even on pattern tiled fields, some will now have tile every 35 feet and that isn`t doing it themselve, hired drainage contractor. 

 

But on beans anyway if they were figuring on 45 bu and $7, now it`s 70bu and $9 ..that`s about double or $300 more than what they were expecting.  So like we`ve been saying for 3 years now "we`ll be okay this year, but I`m really worried about next year".

Esteemed Advisor
Posts: 2,307
Registered: ‎04-29-2011

Re: Get a spoonful

Not everyone is getting 70 bushels per acre my friend..........................................

Honored Advisor
Posts: 13,790
Registered: ‎05-13-2010
0

Re: Get a spoonful

That is very true Roarin`