Short Crop long Tail
Why...because I hear a lot of this talk about cash war chests built up to get through some tough years...can't pay these ground prices and rents with soybeans and history repeats itself.
Re: Short Crop long Tail
This is an interesting observation. It would mean we should take every opportunity to hedge way out when we find prices we like.
I'm not sure about the idea of big cash war chests. I'm willing to bet that the first inclination was to pay down debt, buy land, invest in improvements such as pattern tiling and then to avoid taxes by buying new capital equipment. If this is true, farmers are not likely to be able to get throudh much more than one year without financing and that information will show up to the banks, at least.
Land rents are likely to stay high out of impetus, if nothing else. A person paying $300 or $400 per acre may be unwilling to insist on lower rents because it might give the competition an entry to that land. Eventually, of coures, land rents will come down if prices stay down.
How was demand in the analog years figured? Was it mostly feed? A big part of demand now is ethanol and exports.
Every time we get thiese 20 and 30 year trendds, I wonder if all the factors are the same. I think they are not and therefore I don't trust trend lines without knowing what is underneath them.
So, my purley subjective gut level reaction to Usset's thesis is:
1. Low prices this year, maybe grinding on down. Farmers will at first lock the bins but will eventually have to or want to sell and both futures and basis may suffer.
2. Some pressur on rents this coming year but more pressure in 2015 if prices stay low. For now, high rents.
3. Some impetus to generally stay with rotations for all the reasons that have been discussed on here forever. Marginal states are more likely to lose acreage first, which would only increase the bpa numbers for the main corn belt.
4. A fair amount of corn exports reacting to prices, monetary factors and maybe world politics. One thing about this - my take is that China is stockpiling. That means it can influence the market stsrongy whenever it wants to take a vacation from purchases.
Just one reaction.
Can yo upost Usset's web site? If not, I'll look it up.