Agriculture News, Markets, Weather, Ag Talk, Farm Machinery | Agriculture.com
Reply
Veteran Advisor
Palouser
Posts: 2,402
Registered: ‎05-13-2010
0

Informed opinion on demand destruction

I pay attention to Dayrll Ray. He often has more than an opinion on farm economics but, also the historical facts to back it up - contrary to many other commentaries I read that have an opinion based on generalies and conventional wisdom.

 

http://agpolicy.org/weekcol/627.html

 

Surprisingly, I am also in some disagreement regarding possible imports of corn to the U.S. That's mainly because of the economics of transportation to where animals are actually fed. The port of Wilmington is one of the very few areas where imports can easily be made for that purpose.  It's one reason why Chinese pig herds fed by imports tend to be located by the coast. 

 

The other issue is that growers of cheap corn in Brazil have long distances to ship by truck to reach the ports for exporting. If more corn is grown in Brazil then what crops will they NOT GROW to increase corn production? Changing crops is not a zero sum game - completely - but there is a trade off on increasing or decreasing acres of one crop or another. Pasture and alfalfa taken out for grain decrease other feed sources. Alfalfa is likely to be expensive as acres are decreased for corn. 

Senior Contributor
too close for comfort
Posts: 227
Registered: ‎05-11-2010
0

Re: Informed opinion on demand destruction

Hi Pal: Would you care to take a wag on what the shipping cost is from a field in the back country of Brazil to a feed lot in Nebraska?

Senior Advisor
kraft-t
Posts: 10,784
Registered: ‎05-10-2010
0

Re: Informed opinion on demand destruction

aw Geez. Then we would have feeders complaining that brazil hasn't shut down their ethanol plants and put the acres to corn. Lol

Veteran Advisor
roarintiger1
Posts: 1,633
Registered: ‎04-29-2011
0

Re: Informed opinion on demand destruction

To put it simply,   demand has to be lowered......someone has to do without.....there just isn't gonna be enough to go around.......and.....the corn will go to the highest bidder.

Folks need to quit worrying so much about lowering the demand side.......it has to be done.  And the sooner it takes place the larger the supply will be.   It appears however, prices have to go much higher to secure a decent supply of corn.

"Failing to prepare is preparing to fail." "Success happens when preparation meets opportunity"
Veteran Advisor
Palouser
Posts: 2,402
Registered: ‎05-13-2010
0

Re: Informed opinion on demand destruction

I actually have no idea on the cost and am not sure how to figure it. But start with, say, a 600 mile truck trip for starters. A Brazilian could probably lay it out pretty easy. I understand that inputs like diesel and fertilizer were assisted for the farmer by the government at one time but, not sure about for trucking. I do know the conservative fiscal policies by the socialists has caused the currency to gain in value and that has hurt the farmers because soy prices are set to the $U.S. and the conversion hurts the return to the farmer. Add ocean loading and freight. Then unloading in the U.S., transfer to barges going upstream (on a too low river?), unloading at the more inland destination, reloading on to trucks and dropping at at a users facility x many miles from there. 

 

It ain't going to be cheaper than U.S. corn.

Advisor
jrsiajdranch
Posts: 2,125
Registered: ‎05-03-2010
0

How the demand destruction is working out.

Just another article on catle.

 

Tough times: Analysts expect higher dairy culling

 

 

By CAROL RYAN DUMAS

Capital Press

 

High feed costs and a milk price that can't keep pace will lead to significant cow culling in the dairy sector, according to industry analysts.

With an all time record-low milk-to-feed ratio, a measure of how many pounds of feed can be purchased with the value of a pound of milk, things are quickly going downhill for producers. July's ratio was 1.29.

"Most producers are between a rock and a hard place," said Jerry Dryer, dairy analysts and publisher of the Dairy & Food Market Analyst.

The all-milk price for July was $16.60 per hundredweight, leaving the margin over feed costs at just $3.76 per hundredweight. That compares poorly to July 2011 when the all-milk price was $21.80, leaving $10.40 over feed costs, he said.

Margins have only been below $4 three other times, all during the first half of 2009.

Today's situation is even worse then the catastrophic scenario of 2009, he said, because feed prices are high and the supply is tight.

September corn futures, influenced by drought and the anticipated short crop, are trading over $8 a bushel, and other proteins are high as well

"For some producers, it's not available at any price. Guys are simply selling cows," he said.

In parts of the Midwest, hay produced only two cuttings instead of the normal five, and corn stalks didn't develop ears, he said.

Increases in milk production are already slowing, from 4 percent in the first quarter to less than 1 percent in June. Production has been down due to heat, but it will continue a downward trend due to the price and availability of feed, he said.

"We're losing cows pretty quickly," he said.

For the week ending July 21, milk producers culled 60,300 cows, 22 percent (11,000 head) more than one year ago. Year-over-year changes are typically plus or minus 3,000 to 4,000 cows, he said.

Feed difficulties are leading to heavy culling in the Upper Midwest, and bankruptcies and foreclosures are taking a toll on cow numbers in California.

A number of producers nationwide will sell their cows and keep young stock to milk when the situation improves, he said.

The feed situation won't change until the new crop next year, but milk prices will improve, because production is going away, he said.

Production will be below year-ago levels by September and stay that way at least through the first part of 2013, he said.

The situation has dairymen looking at feed prices, on-farm inventories and cow performance, said Robin Schmahl, a commodity broker and owner of AgDaily brokerage firm.

"It's getting farmers to push the pencil harder; they just don't have the margin to feed mediocre cows," he said.

Cows will be given less leeway for error. They'll have to pull their own weight, whether it's production or breeding back quickly, or they'll be out the door, he said.

Culling will probably see a significant jump in July. Margins are really tight, and profitability is nonexistent, he said.

So far, he's not hearing the gloom, doom and hurt that was prevalent in 2009, but it might just be a matter of time, he said.

"I venture to say you're going to see another round of operations going out of business. The feed price is going to put the nail in the coffin for a lot of guys," he said.

Futures trading for Class III milk is anticipating higher milk prices, running above $19 per hundredweight September through January. That will help, but it won't keep pace with grain prices, he said.

 

Veteran Contributor
llakmf
Posts: 87
Registered: ‎05-13-2010

Re: Informed opinion on demand destruction

I keep hearing all this talk about demand destruction, and do not believe a word of it..Our   f amily has farmed many centuries and only one way  that destruction occurs clean cut. When the government steps up and destroys it. One such occurance happen a few years back with the tobacco situation comes to mind, another possbity is an embargo to a certain country. I find it interesting all these land grant types who preached a laissez faire policy now are saying something diffrent. In the end production will go to those who can adapt to the new enviorment. In other words his (the end users) needs are elastic, not the other way because of greed for market share or high fixed expenses, like in bank payments. What we are seeing right now reminds me of the movie Chicago. The lawyer barry Flyn stated with his obvious guilty client, for the jury you first razzle them and you dazzle them. I think that pretty well describes what we are seeing. Demand will come back faster than you think, it just might not be the same players, and that is what troubles many people.

Frequent Contributor
hwr247
Posts: 55
Registered: ‎09-09-2010
0

Re: Informed opinion on demand destruction

yes u r right.The demand will be there because people need to eat.also the people doing it will change....some will retire and some see it as an opportunity