Drought

[sw363535]

Thanks for the article c-x-1,

That is the second article I have pulled up from that web site.  Thanks for the reference, I like their work.

You are right, things have deteriated since that article.

I appreciate your observations.

[c-x-1]

MY pleasure SW..and thank you! I do as much research as i can w/out actually being in a field. The farmers (most of you - I assume) have many factors to weigh in order to successfully run biz. Was a little under-appreciative of the ample subsoil moisture most areas had going into pollination/fertilization last season, so i've stayed on top of lack of precipitation since last Aug. Only been around 14 yrs or so as a spec, and this season appears to be the real deal, never witnessed here. All i know is if i was farming & had any old corn left, i'd be clenching so tight right now, if other factors allowed.

   For someone like CWG to be comparing this to last year with yield is a complete joke. Kinda makes u wonder who there.....with? They know as well as I what the rain has been this May/Jun compared to last. i don't know if it is ok talking about how you/physical market & make the most from a season, but i'll never be shy about what i'm seeing. When does a farmer get ins payout w/ a bad crop? Obviously, Mn sitting on the best bounty & has less worry about forward sales/short hedging, but what about  others?

   The large funds were just beginning to accumulate on Th - in what appears to be a large breakaway gap, esp in Dec. I mean i look at USDA balance sheet, consider world supply & stocks/use being historically low. Do we have to go back to '50's now or dust bowl to compare tightness? U.S being largest prod/supplier of corn, how much demand destruct will mkt have to do? Kept perplexing how Chinese corn was trading above $9.50 a few months ago while we couldn't sustain $6.00. How did they know? 

[sw363535]

c-x-1,

you have as good a feel for this site as i do.  Lots of comments are from the spec angle, simply because they are on line doing a lot of reading.  My (in head) feeling is that a larger % of the readers are producers who have time to follow, and want your opinion and observation.  But reality is, the number of actual producers continues to decline.  I am part of a production business, with some talented younger partners,  Accounting & marketing is my responsibility.  So I know a couple of good producers are monitoring this site---(wondering why they are not getting cash flow reports).  I just read "marketing" for quite a while, liked the format, and decided I had a region and perspective that was, at least, in the minority or not represented.  The SW area, between Garden City and Amarillo,  produces a lot of grain but consumes even bigger quantities and sends it nationwide as meat and milk.  

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CWG--------There are independent sources of info, and the agenda based sources are hard to ignore, but I think we are so proud of and dependent on the consistency of the corn belt that we want to be in denial until the end.  Usda is getting themselves into a position where credibility is lost.  What little pride the department had died, in many ways, with the "racist" give away scams of the last few years.  Commonly known locally as the Food Stamp Authority, there is not much budget or desire left for Agriculture.

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Our Marketing------We have high costs of production, which comes with water pumping or low rainfall (20" and lower average).  But our advantage is closeness to end users(cattle & hogs headed for the box).  Corn basis is most always positive and gives us a 50 cent+ advantage over most of the corn belt. Wheat usually is high protein headed for the salina-wichita-enid area millers or on the rail to LA--------This year to the local feedlots in a sizeable amount.

For these reasons we lean toward basis contracts and owned storage to market away from the harvest surplus slump.  We deliver direct but sell a lot FOB as many of the feeders have their own supply chain sourcing grain.  Soybean have to be trucked east for processing.  The area is ripe for a processor and more beans are being raised yearly as water supply dwindles and bean price rises.

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Your last paragraph--------I have read that the funds are not wound up yet.-----I wonder if they have got the investment ability they had a few years ago-----with ag being the only bright spot in the economy for a while, I sometimes wonder what the "writeoffs" have really been in the financials the last 5 years.  Without a doubt, investment losses have been fueling land prices.  It is actually sad when the whole country thinks farm land is a good investment. Just MO-----------supply tightness--------not researched yet, but I think you will find the supply(in the US) is tighter now than in the 50's, and much tighter than in the 30's.  From what I have read and been told.  Based on a days of usage stocks.

China is just lucky and unlucky.  They happen to be one of the few in the world maintaining a "backup" supply----gonna look real smart, but the 9.50+ is probably a manipulated price designed to trim demand.  

It's the fact that we(usda) were trying to promote a surplus we hadn't raised yet,,,,,,trying to push the price down to stimulate the economy(like printing money) that makes China look smart.  China was just doing their job and we are asleep at the wheel-----Makes them look real smart compared to us.  But they are protecting their food industry.  Much of our demand is recreational.

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Where I will loose credibility---------------We(US) have lost any vision.  We are governing with a third world mentality---appeasing now, borrow to maintain comfort today-----at the expense of honor and dignity.. ie. USDA has no concern for actual grain stocks and communication with producers----------, now spends its budget on food stamps.----------------

--------(No----I am not advocating for government owned reserves and LDPs-----just, put the country before your politics,  stop raping the public budget with guilt programs, ------------------Leadership at home and in Washington is saying no and taking the heat for an unpopular decision that are good for us down the road.

-------------------enough of that----------------

Yes we are finally looking at the weather "reality",  and if this next few days does not give the Midwest a solid 2+inches, the dye is cast for this years production.  Where will price go,  I have concern when supply is toooo small.  I have been caught several times selling after the user has headed another direction and my product is not what he wants now.  Find myself out of position so to speak.  Much of our corn usage is industrial. And shrinkable.  The big gulp may have sugar in it for a few years and cost $20 more per cup at the pit stop, for a while.  Ethanol is not a big user---they just handle a lot of product and pass most of it on to the end user.----sooooo overstated.   ------------------generally we will survive on half a crop as a whole,,,,,,,,,,,maybe not individually.

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Crop ins------------usually the actual cash flow will not show up until December and except for quirky deals will only cover about 60% of the loss.  Not to mention the marketing opportunity lost.  Or the fact that we will need 2 above average rainfall years to get back to average production.  We are looking at the possibility of an average irrigated crop if the temp doesn't go back to 100+ for two more months, but our usual 220s are not going to happen.  Dryland Ks is gone, Dry Neb is not good but a lot of the nebr production is protected by irrigation.  The Dakotas and Minn will crank out all they can.  Minn and wisc.----I have a son there this weekend, says like a garden(He is used to the arid SW----funny how our perspectives cloud our vision).  I here E Ks, Mo, Ind, most of Ill, ohio, and southern Mich are severe. Parts of canada's corn can't be real peachy.  And DC yesterday was 105 degrees. According to those drought maps, this is something we have never seen before---in those areas.  Will be interesting.

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Sorry for the length.   it is 80 degrees at noon, coolest noon in months. And I missed the sprinkler fixing job this morning.  We have a 70% chance of rain tonite and, if it happens or not, that's is cause for a relaxing Sunday.  Hope everybody gets wet.

[c-x-1]

sw - thanks for all the info. Very sobering. Wondering  if China will have to cover some of us needs over next couple years.

  I have read most of the big inst (banks) are sitting on record amounts of cash - MF deal hurt some, but don't think it will effect ag overall. It's almost ominous to compare corn price this & last year w/ spec length now & then. Are they waiting to really squeeze. Something to consider.

   I read on Agweb about Gulke taking a sobering tour around the belt. To paraphrase him, some areas are worse off than the mkt is giving credit, & that the "crop may be on verge of real disaster that exceeds '88." Also, that "we may be underestimating how high price of corn could go."

   I noticed on last 2 COT reports, commercials were reducing length (normal behavior), but i imagine there comes a time in an extreme situation where things change. Didn't the producers get pretty squeezed in Cotton recently?

thanks again.

[sw363535]

Not up on cotton.

New crop and new crop basis have made quite an improvement in the last two weeks .  But the old crop/new crop spread was exagerated all spring.  Feeders here are concentrating on new crop-----comment last week was "we are lucky to have the wheat we have".  And we had a well below average wheat crop.

If politics lets the price run.  It could be a wild fall.  We may see several months without exports.

[c-x-1]

Cotton increased in futures price from 7-2010 to 2-2011 about  295%.

[sw363535]

cotton has moved north here because of diminishing ground water supply.  but so far we have not looked into it.  Cotton has a lot of herbicide issues that conflict with the other crop practices in the area.

We get into the San Juaquin valley of california once in a while and I am always amazed at the amount of cotton raised there.

Looking at the charts, 2010 to now has been a wild ride in Cotton.  I see why it has been looking attractive to struggling water guys.

[c-x-1]

sw, do you see the technical targets of both SRW & corn  - $13.00 ish, $13.50 - on the wheat?..or do you do chart technicals any?...and considering factors being discussed and realized that these might be reasonable prices to balance/shutdown demand. I'm not puttin' you on the stand r nuthin. Ha!

  c-x-1

[sw363535]

I don't chart as much as I used to, but I don't doubt your assesment.  I felt like when the bail out/stock market issues and the financial struggles that seem to keep happening started, from then on historic charting became distorted.  Like induced inflation.  When the commodities start to look like "best choice investments" and start drawing money that is abnormal spec--------anyway lots of abnormal things have been happening  so I have just gone back to fundamental watching and taking a decent profit margin as long as I can.  I am not sure how good our historic charting will be, until an amount of time has passed.  For our personal purposes I worry more about where our costs go and what my break even is going to be.

[c-x-1]

Got u on the breakeven part. Keep my charting very basic. SRW front weekly made high of 1334^4 in Feb of 2008 so that tgt would simply be a re-visitation of relatively recent highs + tgt is close to 1.62 fib of impulse it had in summer 2010. I hope this price discovery probability is good for your bottom line! Yes, history always rewrites itself, yet still repeats in a different vibration. I look at it like changing frequency. Do you mkt other products like feeders?