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wrightcattle
Veteran Advisor

perhaps quit your whining and diversify

A few acres.

theres no set rule anywhere that says corn farmers are even a needed necessity of life.

 

Uncle Sam created an ethanol boom...and it's typical oil i.e. Pretty much a boom and bust Cycle.

 

so.. Grow up and get used to boom and bust....you hitched your wagon to Big Oil.

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wrightcattle
Veteran Advisor

Re: fall insurance corn price is

Going to be in the $3.40 to $3.50 range just like it seems to be 80% of the time now.

 

thats likely the bottom floor, recognize it or not.

 

diversify a few crop acres to hay or grazing.

 

corn / bean "  farmers don't like hay it seems but there's sure been more dough per acre made with hay lately rather than corn.

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rayfcom
Senior Contributor

Re: fall insurance corn price is

Maybe you're correct about that range, but there is a growing body of evidence that we are at a critical turning point, and if you get this wrong you will be living with a loss that was entirely unavoidable if you read the tea leaves of the marketplace.

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rayfcom
Senior Contributor

Re: perhaps quit your whining and diversify

The point I am making is that financial engineers have created the tools for farmers to avoid the boom and bust cycles, you just have to be willing to use them. 

 

As for me, I am a trader, I don't care if prices go up or down, I can make money in both situations. So I am not whining by any means. My nightmare is when prices stay stuck in a tight range for a long time, because then there is no profit potential in what I do.

 

What I am trying to do is warn the farmers that we are approaching a very risky situation in both the overall economy and by extension the corn and commodity markets.

 

And yes, the corn farmer can opt to plant other types of crop, but its been my experience that all agricultural and livestock markets rise and fall together based on the waves of the overall economy. So whether you're in corn or pigs, you have to keep at least one ear to the ground of the economy to avoid situations that can cost you dearly. We are approaching one of those situations now, so its time to start listening carefully, and take protective measures to keep your heads above water when everyone else is drowning. 

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wrightcattle
Veteran Advisor

Re: Valero is the only company

that owns ethanol plants And retails gas thru their chain of convenience stores.

 

Since farmers own no convenience retail oil / gas / E outlets it appears fairly obvious that corn farmers themselves do not really believe in E sales.

 

why haven't farm coops stepped to the plate and bought some retail convenience stores / gas / E outlets over the past 10 years?

 

Ethanol should be treated as a Retail Consumer Product...with said presence farmers would Have Something.

 

as it is now agri treats E as a commodity...just like oil cos treat gasolline.

the difference is oil cos Own a pile of convenience retail stores to pump Their Product.

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sw363535
Honored Advisor

Re: perhaps quit your whining and diversify

Avoiding the boom and bust cycle by locking in a loss next year................ insanity

 

 

" its been my experience that all agricultural and livestock markets rise and fall together based on the waves of the overall economy"  ---- even recent history does not support this.

 

2010-2012 commodity high prices came while world economies were struggling to survive...including the US pumping new cash into its own and borrowing at record rates, forcing "clean" energy ventures investment on borrowed cash 

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deasmatt90
Senior Contributor

Re: Excellent Article On Where US Economy & Asset Prices Are Heading

I tend to agree with the first post on this thread. Look up LBT bank. It is owned by the prince of Lichtenstein Hans Adam. They manage what is considered institutional accounts worth over 50 million. Hans Adam is ruler of the smallest country in Europe yet the wealthiest monarch in Europe. They post quarterly reports on the investments of LBT bank. Right now they are putting the princes holdings in a neutral position citing the reasons on their websites quarterly news letter, Mainly macro indicators.
As I always say, follow smart money, these people are wealthy for a reason.
I do believe however that ag will be on a rebound shortly! To much break even and below cost of production prices. Also the comment that when one commodity is down it all is together is spot on. Ive also been seeing small niche markets improve. I don't believe 19 corn has hit is low but I'm looking for a break of resistance this spring. Study 18 charts. When finding support and resistance old support becomes new resistance and old resistance becomes new support.
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greatlakes farmer
Frequent Contributor

Re: Excellent Article On Where US Economy & Asset Prices Are Heading

 
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wrightcattle
Veteran Advisor

seems like it was just a year ago that

Grain prices were pretty darn cheap at early harvest.

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rayfcom
Senior Contributor

Re: perhaps quit your whining and diversify

I am glad you brought up 2012, as it was such a pivotal year in corn prices for the years that followed. If you recall, the US economy finally was showing signs that the recovery from the 2008-09 financial crisis and the Great Recession had found sustainability. The economy grew by an annualized real rate of 4.6% in the last quarter of 2011, followed by consecutive quarters in 2012 that registered real GDP growth of 2.7% and 1.9%, respectively. On the back of three straight strong quarters of growth, corn prices responded sharply to the stronger economic growth,  sharply as Spring turned to Summer, moving up nearly $3 from the end of May to the beginning of August. Financial and commodity markets had simultaneously come to believe that economic expansion was at the doorstep, and with interest rates so low there had to be some kind of uptick in inflationary pressures. 

 

Alas it was not to be, and as the US economy registered nearly no real growth in the second half of 2012 (real GDP readings of 0.5% and then 0.1%), commodity prices reflected almost in real time this reversion back to the sluggish to no growth performance of the prior three years.

 

So yes, when you actually look at the data, truly reflect the supply/demand equation of the US and global economy, almost in real time. Much of this is due to some very smart people who track the correlations of forward looking economic indicators, and earn some very lucrative profits for the hedge funds they work for as well as for themselves. Which is why it behooves anyone involved in the production, purchase and sale of agricultural and livestock commodities to see their business against the backdrop of what's happening in the overall economy. I assure you that if you don't subscribe to this belief, there are many others who do, and often it provides them with the early warning signals that can give them a competitive advantage over the rivals to their business. 

 

As I wrote earlier, by hedging some of next year's inventory in advance at those critical times when the overall economy seems to be at a turning point is not insanity, its prudent management of that inventory. Its not locking in a loss per se, Because you don't hedge anything more than a fraction of the total expected inventory. If prices rise after putting on the hedge, you still have plenty more inventory to sell at the higher prices. But if prices take it on the chin, at least you have some rather healthy profits from the hedges that will cushion the resultant losses that you take on the unhedged portion. Its simply a means of reducing some of the risk you have because you are somewhat a hostage to the overall US and global economy, rather than rolling the dice with your entire business. 

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