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Veteran Contributor
Posts: 485
Registered: ‎09-20-2018
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Re: Corn Price Update For October 25

I remember reading a whjile back that there were farmers in the southeast who were building man-made ponds on their soybean fields to raise catfish, because catfish became a big hit at Northeastern restaurants and the revenue from catfish at least at that time was a lot more than beans.

 

Actually that's how markets are supposed to work. When there is oversupply of one product relative to others, some of the farmers in the over-supplied market naturally will look for a more profitable crop to grow. At the margins that leads to a reduction of the over supplied condition, which then causes prices to reverse and go higher. The problem is cost of entry. If the cost of entry is low enough for new suppliers to come on board and produce what others are getting out of, this results in a net unchanged supply and the over supply condition persists, I think that's what's been happening for a while now in South America. Their land cost there is lower than in the Midwestern US, so both multi-national farm conglomerates as well as local people looking for a way to feed their families in economies that are not so vibrant have chosen to start corn farms in South American countries, pushing up the global supply of corn and causing prices to have a hard time maintaining any rallies. I believe that they had the same problem in sugar at one time, and that's how the two sugar markets in the US - the domestic and world markets - came to be. It was a way to protect domestic sugar producers from the avalanche of foreign sellers into the US. Perhaps now that tariffs to protect American businesses have come back in popularity, some form of a domestic set aside for domestically grown corn will develop, especially if the corn farmers pressure their representatives in Congress to do something to help them fend off foreign imports. 

Honored Advisor
Posts: 17,394
Registered: ‎05-13-2010
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Re: Corn Price Update For October 25

"this too shall pass" I think the pain of acclimating to the new grain price range is what we`re experiencing.  You can`t raise enough $3 corn to pay for a $200,000 tractor or a $500,000 combine.  You can`t raise enough $3 corn to pay $250/bag seed corn.  So companies that produce this stuff to peddle to us are going to have to retool, if they don`t perhaps "Mahindra" will be the new John Deere and "Epley Seeds" will be the new Channel Seeds.   Or if corn goes lower, I`ll have to give Dad`s old F-30 a overhaul and plant Reids open pollenated seed will a 494a planter   Smiley Happy

 

We laugh at open pollenated seed, but you know if corn goes to $2 or so, that open pollenated will have a new set of economics.   You spray open pollenated with Resicore and put 100lbs of N, you might get 150 bpa yield ...and what a $1 per acre in seed costs?   Think about it!

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Veteran Contributor
Posts: 485
Registered: ‎09-20-2018
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Re: Corn Price Update For October 25

You know it was only twelve years ago when the range for corn for the prior twenty years was $2-$3 a bushel. Have costs risen that much in twelve years since that a return back to that price range would be that devastating ? Especially when for at least half of those twelve years the US and world economy were struggling to survive. And then when the economy finally did start to recover, you entered a bear market for crops. How were suppliers able to raise prices for supplies and equipment that much in the face of a five year global recession followed by a five year bear market in prices for crops ? 

 

The more I hear about this farm business the less sense it makes. 

 

btw, the bounce I wrote about yesterday for corn off the $3.60 area is happening today. We are back above $3.65 right now, back in the sell zone. Very critical area here, if it gets up through $3.70 we probably move to the mid-$3.80s. If it fails here, you'll see the low $3.40s rather soon, maybe within two weeks.