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Veteran Advisor
Posts: 1,405
Registered: ‎10-18-2016

Yadda, Yadda, Yadda

What action does one take to market one's grain now?  What does one do about next year's crop?  Philosophy does not pay bills.

Senior Contributor
Posts: 967
Registered: ‎01-03-2015
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Re: Corn Market Update 11/20

Good question, getting bout ready to pull the plug on 2018 crops
Veteran Contributor
Posts: 485
Registered: ‎09-20-2018
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Re: Corn Market Update 11/20

Yes sir, you have hit the nail on the head. I am constantly amazed that anyone still lends money to this country, because there's no way that the debts ever will be paid off. What really happens is its like a game of musical chairs. Everyone knows the US will not be able to pay down this debt ever, but as long as the tell tale signs of impending doom as not visible, the entire investment community will keep throwing good money after bad, figuring that they will be able to get out before the default occurs. It really got to a crisis stage in the 2010 to 2015 period, as investment capital dried up after the financial crisis. That was the real reason the Federal Reserve did their Quantitative Easing programs that bought something like $4 trillion in US government and US government guaranteed securities. There were not enough lenders in the world to finance the obama deficits, and so the lender of last resort - the Fed - had to step up to the plate and take one for the team. 

 

This is why debt collapses happen so quickly, because when the time comes that the borrower has run out of credit lines to tap, and that becomes evident by a failed auction where they cannot sell as many bonds as they had intended to sell, all the current holders of their debt rush to get out all at once, and the value of those securities drops sharply. That's going to happen in the US debt market, they will hold a couple of auctions for ten year notes and thirty year bonds, and there will not be enough buyers to take what they are trying to sell. The Fed then will give some horse manure excuse for buying government securities, and they will get plowed under by existing debt holders who then realize the end is near. That will be the time to buy gold with both hands and your feet as well. 

 

But until then, the US government will continue to spend a trillion dollars more a year than it collects, and as long as the world is stupid enough to buy the debt, nothing will change. But as every day passes and the interest on the debt builds to the point where it becomes the largest line item in the Federal Budget, we all will be one day closer to the eventual armageddon that will restore the order of economic law to the US government. That also will be when the country splits into three parts...to help restore confidence in the US government's ability to pay its debts, they will try to raise taxes, and the South and MidWestern States will refuse to collect what Washington wants. The reason they will object is because they will claim that Washington is using the money of hard working people to pay for the losses wracked up in the cities. The government really will be powerless to do anything about it, so they will stop all Federal funding that was going to the protesting States. That will precipitate those States leaving the Union, and what can Washington do then ? The country would never stand for a Lincoln-esque type answer of sending in an army to take over those States. Besides, most of the army members come from those States, and the people in those States already are armed to the teeth. The US can't even bring order to a bunch of sheep herders and opium farmers in Afghanistan, how are they going to control half the country, the half where most of the soldiers come from and where tons of ammo and guns reside ? It would never happen. 

 

So you'll have two countries at that point, and then Washington will have to do whatever it can to cut its losses. It will tax the hell out of Wall Street, which will be poetic justice since it was the Wall Street crowd that funded the campaigns of the imbecile who doubled the US debt in just eight years, and they will have to cut expenses. That brings California into the mix, a State that receives over $20 billion a year to pay for their gaping budget deficits caused by all the free medical and education services they provide free of charge to illegal immigrants. California will be told their Federal appropriations are getting cut, at which time the Governor will negotiate with Mexico to become part of that country. The Mexicans may or may not agree, but Washington will move forward with throwing California out of the country. Oregon and Washington State will protest in sympathy with California, and they will be ejected as well under the third man in rule of the professional sports leagues that penalize the third person who gets involved in a fight during the game. 

 

The Alaskans will seek to join the South and Mid-western States, offering its vast oil supplies to sweeten the pot, and they will be accepted. Hawaiians will vote to become part of Japan, since 70% of those islands are Japanese anyway, and the sacrifices made by Americans on behalf of the servicemen who died in Pearl Harbor will then have been made in vain. The good part is that the little witch Senator from Hawaii who told all men to shut up during the Kavanaugh hearings will be bitch-slapped by the misogynistic Japanese political system.

 

That's what I see happening during the next twenty years, it should start probably around 2022 to 2025 when the first cuts to Medicare spending will be announced as that program will become insolvent under the weight of the massive number of baby boomers who reach the age of entitlement under Medicare. In fact, that will be the first warning that the final chapter is being written, when Medicare needs a bailout.

 

Anyway, at least you can grow food to feed people, that is the best position to be in when an economy is imploding. The farmers will become some of the wealthiest people, as food prices will soar while the rest of the economy tumbles. By that time the consolidation I see coming in the farming industry will be mostly finished, so the farmers in the industry then will have the financial resources and then market intelligence to be able to push up their prices and make the price increases stickl. Because after all, when the world is crumbling, people still will pay to eat.

Veteran Contributor
Posts: 485
Registered: ‎09-20-2018
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Re: Yadda, Yadda, Yadda

Well if you have been reading what I have been writing here for the last month or two, I advocated selling between 20 and 50% of your expected 2018 corn production in the $3.60s price area. And then another 40% at $3.85 to $3.95, with any remainder to be held in case the market pokes its head over $4. In case the market did not get up into the $3.80s, my suggestion was to watch two very critical price levels to the downside...the first being $3.60 and the second at $3.54. My feeling has been that if the first is broken the second will be tested, and if the second is broken then a lot of pain will follow. 

 

So this morning we are testing the $3.60 support area...if it breaks I would increase my sales to a total of 60% of my expected production for this year. And if $3.54 breaks down, I would throw in the towel. maybe keeping 20% of what I have to sell in the bin in case we get a rebound this winter.

 

For next year, there really are no good alternatives if the economy is truly heading into a recession. I would be selling the September and December 2019 corn futures now, and I would be planning to cut back on my acreage, because I might wind up selling in the low $3 range or even in the $2 area if this recession gets legs. There's a lot of time still between now and when you have to plant your 2019 crop, so you can always increase the acreage you are going to plant if the economy winds up stronger than we now anticipate. But if it doesn't, you want to get down to the bare bones minimum of acreage so you don't wind up growing crops at a loss. 

 

That's how I would be playing the marketing part of the business now, hoping I will see the market hold this $3,60 area but ready in case it doesn't.

Veteran Advisor
Posts: 4,129
Registered: ‎05-13-2010
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Re: Yadda, Yadda, Yadda

Just  think  -  the  world  is  being   fed  at  a  40  -  50  -  %   discount  -  should  free  up  lots  of  capital  -   -   -

Veteran Contributor
Posts: 485
Registered: ‎09-20-2018
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Re: Yadda, Yadda, Yadda

[ Edited ]

Unfortunately the capital does not get freed up, it winds up in the same hands all the time. When inflation is low companies cut back on wage increases so workers wind up never being able to increase their standards of living, and when deflation hits, companies get rid of workers. All this in the name of shareholder value. 

 

But none of us have any right to complain, because we let it happen. Only 18% and maybe less of this country is unionized, the other 82% having drunk the Kool Aid that unions are bad. Sure, union leaders did a lot of stupid things when unionism was strong in the 50's and 60's and into the 70's, but instead of rectifying the problems within unions, Americans turned away from them. Today farmers and doctors and tens of millions of workers are dictated to by the holders of the factors of production, being told what kind of fees they are to charge, what kind of prices they are to accept, what kind of wages they must work for - in short, what kind of life they are forced to live. And none of these people have an advocate on their side, a force strong enough to stand up to the owners of universe and say no, we will not keep you alive for that fee, no we will not feed you at that price, no we will not put water in your swimming pool or dividends in the pockets of your shareholders for that amount.

 

So don't cry about spilled milk until you're willing to clean it up. You farmers don't like the prices you're getting., cut your acreage by 20% next year, and push the price up. Some of you won't make it, so start a fund with your new profits to help out each other. Doctors don't want insurance companies setting their income level, form a union and strike, caring for only the most serious patients until your fees are raised. Workers in companies don't like the fact that their CEO makes 1000 times more than they do, call up the AFL-CIO and tell them you want to unionize. They'll have a rep there tomorrow to get the ball rolling. 

 

But you and I know it won't happen. I will even get feedback here telling me how its a socialist idea, how unions don't work, and all kinds of other nonsense. But you know, your parents had a better life than you, they could live on one household income quite nicely, they weren't in debt up to their ears, didn't see their jobs being shipped off to Mexico or Asia. And that was in large part because they had a union that would shut the company down if it didn't take care of its workers. Okay, the stock market was below a thousand, so there were no billionaires. But are you better off because the stock market is at 24,000 ? Probably not, but the shareholders who own the companies that keep raising your production costs are. So what has the destruction of unions done to make your life better. Nothing.

 

That's the story in America. Either wake up and take back your country, your business and your life, or become comfortable with giving up your standards of living to make the owners of capital more wealthy than they already are. You have the power to do something about it, but if I'm not mistaken you will wait for a crisis that affects all of you to your very core before you take a stand and do something about it.

Senior Contributor
Posts: 425
Registered: ‎08-02-2012
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Re: Corn Market Update 11/20

Revolution, been saying it for two years. Stand up and fight people. The fed is way to big for way to long. This country was established to be run on individual state governments not a national one. Like ray said we the people let this happen so the few could get rich while the majority suffer. Time to take it back!!
Veteran Contributor
Posts: 485
Registered: ‎09-20-2018
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Re: Corn Market Update 11/20

You don't need a revolution at this point, Just someone with a respected name in the farm community willing to take the reins of a new organization, something like the United Farm Owners Of America. The main task of the organization is to evaluate the various markets in which your members grow crops, and make recommendations as to what percentage of currently farmed acreage for each product should be farmed next year in order to get prices to where the majority of the farmers for that crop will feel comfortable with the profits they make.

 

The recommendations cannot be binding on the members, because the guys with the capital over the years got their puppets in Washington to pass laws about price fixing and monopoly, knowing that if cartels like OPEC formed in the US industry groups, the power and profits would start tilting to the people who actually made those products instead of paid for them. The important thing is that the members follow the recommendations without being forced to do so.. Everyone has to believe that following those recommendations voluntarily is for not only the good of all farm owners, but also for the long term benefit of each member.

 

The early years could be tough, as its always roughest for the pioneers of any new initiative. But in a few years, the voluntary united stand of the farm owners will have a direct effect on prices, and you will have control over your prices and your incomes. You will hear objections that other countries simply will produce more to make up for what you are not producing. But I doubt that any country on earth, or even all of them combined, have the capacity to replace a 20% drop in production from US farmers in most if not all agricultural products.  

 

That would be the first step to getting prices higher, because you will stop the over-production that have sunk agricultural prices for the last five or more years. Its not going to be easy, because the mentality of the farmer is like the mentality of the Indian - the Indian thinks his life will be better by having more kids to work the farm and take care of him when he is older, and the farmer believes that the way to make more money is to plant more acreage. But now India has a billion people because of their mentality and their standard of living is horrible as the country is too crowded for its available resources. And farmers all suffer from depressed prices due to over-production.

 

Changing ingrained attitudes is a very difficult thing to do, especially when the kind of drop in acreage planting necessary to raise crop prices will make a lot of farmers wonder if they will have enough income to pay their fixed costs. I would bet the first objection to this idea will be "what if it doesn't work?" And its a legitimate question at that. At least initially, your competitors in other countries will promise your end users that they can make up for the production drop in America, and the end users will give them a chance to do that. So the first year may be really hard, until the end users see they cannot get what they need and finally cough up the extra money to pay for the price increase for your crops. The whole plan revolves around near complete unity among American farmers, and I don't know if that will happen. Living at the edge may be the more attractive option for many farmers who are afraid to take the chance of hoping the rise in prices will more than compensate for the drop in acreage.

 

But if crop prices really are at a discount of 50% as Mr. Meade asserted earlier, then dropping production by 20% could very well get prices up 30 or 40% and corn still would be at a discount. So its probably a really good bet that incomes will be a lot better than they are now. But I don't know how many farmers will be convinced that the trade-off will work out in their favor. That's why it usually takes a real crisis to get people to change, because only in a real crisis will they have nothing left to lose so they will try anything at that point.

 

Anyway, if you want prices to go up, that's what has to be done. The production of the crop has to be reduced. Or you have to get some scientist to develop a type of corn that can be proven to extend life, or cure some disease, or have a tangential benefit so that the whole world will be eating corn at every meal. The production cut seems like the more likely route.

Honored Advisor
Posts: 17,371
Registered: ‎05-13-2010
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Re: Corn Market Update 11/20

Illinifarmer, you`ve been saying "revolution" for 2 years?  Smiley Very Happy   oh really, what happened in 2016?

 

Actually if we wanted to "revolt" and end the fed giving CONGRESS back their power to coin money, 2 yrs ago we elected a man with the guts to do just that.   However, "let`s see your taxes!  Talk to Mueller! be nice to Acosta!   Don`t build a wall!  Let China continue taking us to the cleaners so we continue to get a nickel more for our beans!  Take away your daughter`s security clearance!"   all this stupid crap these little mosquitoes fly around pestering when the entire country doesn`t have the luxury for such baseless nonsense.

 

In 1913 this country replace it`s revenue source from mostly tariffs to a federal income tax.  Today half the country doesn`t pay in on it they have no skin in the game, but by God they sure vote!  And in many cases recount votes to get the outcome they want.  

 

Also in 1913 we got the Federal Reserve that`s is no more a part of government than Federal express delivery service, yet they print up money, set interest rates and determines who lives and dies in business...talk about "death panels"!  The expressed powers of congress says they should "coin money".  That way "we the people" could vote them out if they got crazy printing and raising interest rates.

 

I don`t recall seeing any "federal reserve governors" on my voting ballot!   And if this, especially this president tried to fire Jerome Powell for raising interest rates too much, the mentally challenged politicians and media would impeach him.  The fed has no accountability. 

Veteran Contributor
Posts: 485
Registered: ‎09-20-2018
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Re: Corn Market Update 11/20

I've been watching the Fed for a very long time, and am not at all fond of a lot of their actions. They make a lot of mistakes, primarily because they have too little understanding of how markets work and what the markets are saying, opting instead for reliance on models that try to incorporate a lot of variables that never seem to have the same balance of importance in any one business cycle. It leaves the institution trying to drive the car forward while looking in the rear view mirror, which is why the Fed usually is too late to start a change in policy and way too late in ending a policy once started.

 

In recent decades, at least since the 1980's, the Fed has become way too political, giving up a critical function of bringing discipline to politicians regarding fiscal responsibility. They have monetized a national debt that will destroy the American economy over time, when they could have used monetary policy to serve as a deterrent against Washington's irresponsibility regarding yearly budgets. That is the worst of errors the Fed has made, because by giving license and support to Congress in their deficit spending budgets, the Fed has allowed the debt to get to unmanageable levels, while all along they could have prevented Congress from itself by threatening to make the cost of additional borrowing so great that the other more reasonable alternative - cut spending and spend more efficiently - would have been the only acceptable choice to the politicians in Congress.

 

Notwithstanding those mistakes, the Fed with all of its flaws is an improvement over what existed prior to their founding. Without a central bank that could control the supply of liquidity at critical turning points in business cycles, the US economy prior to 1913 was characterized by perpetual boom and bust cycles, with every cycle ending with a devastating economic depression that brought the country to its knees. In theory, economies should be self-regulating, banks should restrict lending when too many bad credits seek loans, and should be more free to offer credit when loan demand slows. But in reality it does not happen that way. Part of the reason is that there are too many banks in America for any one banking institution to be able to get a good read on the overall economy, part of the reason is the profit motive that naturally occurs in a privately owned banking system. And for those two reasons there were the boom and bust cycles that occurred prior to the establishment of the Federal Reserve. 

 

No, the problem is not having a central bank, the problem is having a Congress that does not set hard and fast rules over what it wants its central bank to do. The Fed mandate is so vague as to give it far too much leeway in the conduct of its policy initiatives, which in turn allows the Fed to manipulate markets and make unpunished mistakes that serve to hurt and entire nation. For example, it was wise for the Fed to inject permanent liquidity into the economy by virtue of the banking system after the financial crisis caused a huge credit crunch. But was $4 trillion in purchases wise ? Didn't the Fed help create a situation where banks that should have folded for poor management were kept alive because the Fed replaced the capital they had lost due to those bad management decisions ? And didn't the Fed foster even greater amounts of national debt creation that will cripple the US economy over time by being willing to lend to the US government when all other sources of capital refused to make such loans ? 

 

I can understand why the Congress would want the Fed to have the widest possible leeway in its decision making authority, it frees the Congress of liability to some degree when things go bad in the economy. That may be helpful for re-election purposes, but it results in Congress abdicating its responsibility to govern by replacing representative government with the dictatorship of un-elected officials who are not held accountable for their errors. That's not a fault of the Fed, its a fault of Congress. 

 

If you ask me, the Fed has done a very good job of preventing recessions from becoming depressions, such as in '74, '81' and 2009. But they have a lot more authority that is required for them to do their jobs, and they should be held responsible for their mistakes. They should be prevented from intervening in financial markets except at times of emergency, and their latitude should be clearly defined by law. Congress needs to be forced to make the hard decisions about spending reductions to reduce the outstanding debt, and the Fed should be prohibited from programs that allow them to purchase securities in such large size so as to be able to monetize the irresponsibility of the Congress. There are many other limits that could be aptly placed on the Fed's activities, but the initiative to enact these limits has to come from Congress. And ultimately from the people who elect the Congress, the voters need to force Congressional candidates to promise to reform the Federal Reserve system, and then hold their Congresspeople accountable for making good on their promises.