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09-26-2016 12:04 PM
In the bigger picture, your 3,000 acre crop doesn't really matter to the overall market mindset. Here's the clue-in, the market know this, do you? I've pieced together some thoughts on this "One Big Field" theory, as it relates to developing grain marketing strategies. Flooded fields in Iowa, in September, so what. Bumper crops in southern Indiana, ok, tell me something else. Harvest issues in Argentina, good for a short rally, but then what?
Full Story: One Big Field
What does this all mean to you?
09-26-2016 12:42 PM
09-26-2016 01:18 PM
Thanks. I've been sitting on this story idea for a few years. The other day I was mowing my yard, started thinking about how it has good and bad, smooth and rough, weeds and weedless areas, and it all came back to me. I hope it jogs some minds a bit.
09-27-2016 04:29 PM - edited 09-27-2016 04:36 PM
It is a good read.
Mike it is a story that could have been written in the 1930's and still been true in theory... Yet don't get me wrong, I like the story. It is similar to Unified healh care or the idea that the UN will bring peace to the world. Sounds good yet struggles with the details
The story makes a couple of giant leaps in assumption... and seems to be going in two directions....
Volatility and sales opportunities year round...... or
If the world production is our one big field. Then the supply now becomes more stable and less volatile----- you seem to be making the case for stability and better world distribution of commodities. A free and open marketplace for all....no fears, affordable grain for all because the field is bigger... volatility is diminished... production problems regionally don't matter that much....price is not going to respond to that..........The article states in no uncertain terms that we have moved into a global system where the things that affect the market are not production or usage.....and the only opportunity to price this year was ---"the managed money investors ran up the corn market"--the funds casino -- and if you happened to be in Brazil---"the Brazilian real currency was getting hammered, they were selling their low-cost soybeans on the export market" --currency devaluation.--(now wait, if your currency devalues and you can buy less stuff with it, did you actually get more??)
So according to the "one big field" discription there is absolutely no reason to plant the stuff if you can't see a profit. And even not planting will not affect the market price....because it is just your field.....
Like most good ideas since the computers took over thinking skills, this is another basicly solid idea, that has been expanded into a theory that is disconnected from a lot of variables that get in the way......
Example....... I have a friend who comes to work with me seasonally because his son is one of our foreman. Mr O, is a foreign national who has a SS# for a seasonal work permit. He was 45 at the time and I asked a Social Security supervisor and two congressman if Mr. O paid SS tax for 40 quarters as a foreign national could he recieve benefits from US SS retired in his home country. A Resounding yes... the rest of the world can therefore enjoy the benefits of our wonderful system if they pay into it...
But when it came to the details, someone forgot to mention that his dependants have to have a US identity, and the IRS will not allow him to claim dependants in another country....................... see there is always a trip through the mine field of practical application...
small details ignored in "one big field"..........
The sources of information have become ever more unreliable and political with globalization of the trade........
. if supply is not a factor because of globalization, How can demand be a factor. For the assumption is over production is now guaranteed...... again like it used to be in our US based senario. In this article only speculation is allowed to be a factor...
All production is not available to the market............ China for instance is the worlds number one wheat producer at 125.6 million metric tons and they inport more than they export... Over double the any other country and not available to the world market.
Farmers are not as simple as"the market assumes"........ I think most farmers know that their field is not going to affect the world market. In this respect the article is demeaning to most contributors to the forum. Most farmers market in respect to basis and not the global "market" price.. just as the Brazilian real devaluation mentioned in the article was not global, but local like basis swings...
The "market" is a base "sticker" price for a starting point. Marketing is done when the final adjusted price is achieved by considering, basis, quality, freight, markup etc.... --------- location, location, location... and service to the industry...
And the assumption that farmers care only about farmers is not enjoyed.......
In 2011 the market and usda ignored a terrible drought in Texas, in fact every field south of I-70 and west of the mississippi was affected..... I for one, became a participant on this forum to tell the story. Not just to our local buyers, but to the rest of the forum. If an end user cared to read they had ample opportunity to have their needs hedged going into 2012 instead of acting suprised like usda when the drought moved north into the corn belt.
I am sure to the "in the know" market anal-ist I was just another whining farmer. But it's important to know the local issues, contrary to the assumptions of the article. Because markets may be set globally but crops are marketed locally. There is a big difference...
09-27-2016 08:55 PM
SW - Last sentence has quite a bit of fiber and traction - on the other hand the headlines are made by a small portiion being exported while domestic customers seemed to be offered indignenty---
I continue to question efforts made of our leaders trade scheme's only to have a lack luster backwash and interjections we are witnessing in this election cycle carnival---
Faint memory of our obligation to nourish the world only to have your contents on a bankrupt ocean vessel --- Logistics can be an interesting subject matter especially when a judge has to order 10 million $$$ to just off load 4 vessels on the docks much less tthe expendentures of their final destination---
Supose that is where the headliners come up with tunes of something like '' How Do You Like Me NOW '' ?
09-28-2016 01:45 PM
Great point....... this "globalization" movement is assumed to be the now and the future by the article........
But it is just a spin on words........Globalization has been in place since WW1, if not before, with ever increasing trade between nations. Globalization this time deals much more with "equalization" and social reform ---- thus requiring the environmental concern to keep us all working together.... It came about in the 1990's when technology inspired our immaginations toward mass control and unity through communication and data sharing... I know sounds goofy, but in our case CME grabbed on to the idea of expanding their "good thing" into a world wide "better thing". Just a profit grab... The world was trading of CME before the change.
On the overall scale.... Technology is what is being "globalized" this time, not much else.... the environmental movement gets lip service, but not much of the world is trying to live up to the rediculous regulations and laws that are US based, and the world has always taken the UN decrees as "suggestions"... (VW just being a recent example)....Manufacturing and business will be done at the point of least resistance. It has as much to do with legalities as it does cheap labor.... it is not cheap to manufacture on the otherside of the world and ship across the pacific.......... all it has to be is a little cheaper or better.... The US has lost stability legally, socially, and educationally. We are too ignorant to know a good trade deal from a bad one... we just watched a debate talk about being a world leader in technology and its control..... by two people who may very well be computer illiterate in more areas than email...
(this congressional vote to override the veto of that silly 911 law... is one of those issues that may unravel the "globalization" issue. Eventually the world is going to balk at those things that are wrong in the US. Like going after the deep pockets with a lawyer and protecting the criminals)
As it fits commodities, the jury is still out on this new format, it may not be the future.... I think the "great expanse of information" refered to in the article is not researched or "fact checked" and probably will not ever be.... Therefore when Russia decides to dump all their reserves and manipulate the market like in 1929-30 and again in 1972, they will not even have to load a ship.... there will be no cost at all in selling their wheat at $4.50 and buying ours back for half that.... Not even a ship will be loaded.... they have our CME speed to facilitate the transactions...... millions of them generated from various points in the world....
The idea becomes a little more realistic when you consider that China raises 125 million metric tons of wheat, more than twice the second place country.--it never leaves the country nor gets sold on the world market, but it doesn't have to leave the country these days. And China certainly knows "posession is 9/10 of the law"
But who cares as long as our microsoft stock goes up.
Nafta and those "clinton" trade deals did not get him that UN position, but sure put us in a bad position, some think we deserved it.... I think it has a lot to do with the protest vote in this election.