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Senior Contributor

Re: Floor Talk October 10

You should be looking in the mirror when you say that.

 

btw...https://www.youtube.com/watch?v=Yop62wQH498

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Veteran Advisor

Re: Floor Talk October 10

Rayf, this site is called Successful Farming, not successful marketing of imaginary paper bushels. 

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Veteran Advisor

Re: Floor Talk October 10

Ray,
Are you really 50 years old? The way you talk and brag and know everything, sounds like you are in your 20’s or 30’s.
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Senior Contributor

Re: Floor Talk October 10

Those imaginary paper bushels will someday be the difference between survivors and losers in the battle to keep a lot of small family farms in business.

 

Adapt or die, but don't cry when you lose because you failed to use all the weapons that were made available to you.

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Senior Contributor

Re: Floor Talk October 10

I don't talk, I write.

 

I don't brag but I tell the truth.

 

And I'm gonna hate to see you get plowed under when the next recession comes.

 

But I will miss you when you go. Because in bear markets, its guys like you who don't sell until the price goes so low that if it goes any lower you won't have the equity you need to get the loans to buy next season's supplies. When you finally throw in the towel, its guys like me standing there waiting to buy.

 

What's incredible is that it all could be so different if you would not be so stubborn about hedging part of your production while its in the field, so you won't be forced to capitulate when prices dive. 

 

I've never seen such animosity towards some one trying to help you improve your earnings. Its really unfathomable. If I sound like I'm in my 20s or 30s, you sound like an intransigent teenager who needs a time out to re-calculate how best to run your business.

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Veteran Advisor

Re: Floor Talk October 10

Rayfcom -- At least to me -- It's not necessarily the things you suggest, it's more the why and how.   Most of what you say, we've heard before, whether or not we agree/disagree.  Many of us are well-educated.  Most of us have many years/decades/lifetime of experience.  Most of us have weathered many storms, ups/downs, cycles, etc., all without your particular hints and self-professed wisdom, we are still here, and we'll still be here next year.  There are always more tools available -- we don't necessarily use all of them, we tend to use the tools we handle the best.  That said, if I am 10-15% less profitable than I could be, that's my fault and I accept that I'll pay less taxes, run older equipment, and lug a little less gold into the grave.  Generally speaking, basis improves after harvest, currently looking at -40 corn basis, -85 bean basis -- in this area, that's about double from just a couple months ago, and is typical movement for harvest time -- Jan pricing at -30 corn and -60 beans.  Even hints of a sensible trade negotiation/deal with China would be a market changer.

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Senior Contributor

Re: Floor Talk October 10

What I am suggesting may not be necessary now, just like the overweight guy with high blood pressure sees no reason to reform his diet and start on hypertension medications...until he has that first heart attack. Corn farmers have been lucky for a long time now, you had the windfall profit from the run over $8, and even in a bear market since 2012 you still have been able to sell at prices well above your costs. Even if the basis seasonally comes in after harvest, what good is it if the basis shrinks but the overall price declines ? You still lose versus what you could have sold your crop for when prices bounced before going back down.

 

Your problem has little to do with basis or one season's prices. Your problem is that the good luck you have enjoyed for a long while now may soon run out, because your margins are so thin now that one more big move to the downside in price, especially if it goes down and stays down, is going to bring your cash flows so low that even if you have equity in the land, you won't have the cash flow to qualify for credit. And remember, banks get extra specially stingy during recessions, remember the credit crunch that lasted from 2008 through 2011 ? Back then you had rising corn prices and strongly positive cash flow, so you were able to get credit during a credit crunch, this time you won't be so lucky. 

 

As I have written elsewhere in this forum, corn prices look to be on a long term cyclical move back to the range they traded in from ~1986-2006, approximately between $2 and $3 a bushel. And if history is any guide -which it is - if you get to those levels you're probably going to stay there for the next 20 years. None but the best capitalized farms will be able to sustain the cash flow problems that such a move creates. What will happen then the least capitalized farms will start to sell off, and that will bring a negative pressure to land prices that will sink everyone's land equity. As the price of land falls, it will bring even more sellers to the real estate market, which as we have seen where ever this vicious cycle occurs, causes a spiral down effect. Finally, when the cost of the farmland allows overall costs to align better with cash flow, the downward spiral will end, as the market will be clear from weak hands to strong. Regrettably, that will only serve to increase the monopoly effect of only a few large producers, which at that point will push prices higher once again. 

 

This is what has happened over again in the commercial real estate market, the banking industry, and any other enterprise where credit plays an essential role in maintaining business operations. 

 

Which is why I say that if you're a small farmer and you want to keep your business and your land in the years to come, you are going to have to adapt or die. A 10% net return on your assets doubles your wealth every seven years, which is the only way you will be able to exclude yourself from the downward spiral that is coming. And if you don't start employing the means necessary to capture that additional income now, you won't be able to when its needed, it will be too late. You need to start increasing your business profitability and overall wealth now in advance of what to come.

 

That's why you should not be so complacent now to say that you don't care about the 10-15% in extra profits you would be making solely by taking the simple step of incorporating a hedging program into your business. Once you find an adviser with a proven track record, the program will hardly take any of your time, because your adviser will be paid to do the work on the finance of your business while you continue to focus on the farming of your business. 

 

I am sorry I got dragged into this conversation which started because several members in this forum were complaining how they could not breakeven at current prices and therefore considered the best strategy to improve income to sit and wait and hope for a recovery in prices up over $4. I should have left them to be happy in their day dream and not gotten into the entire discussion of the bear trend in corn prices and how to save themselves from inevitable ruin if they did not adapt. I have nothing to gain if any of you take the steps to save yourselves, and when you fail it does not benefit me at all because I am not going to buy a farm and learn how to work it at my age. 

 

There's an old saying that says no good act goes unpunished, I tried to help people who didn't think they need help even though unknowingly they are whistling past the graveyard. What I still can't understand is how can an industry where nearly 40% of its business owners share in a $20 billion handout each year from the American taxpayer think its doing so well that it doesn't need an extra 10-15% increase in profitability ? If all the farmers were doing so well, why do they need the taxpayer to write them a check every year ? No one writes me a check for what I do, and I work just as hard as any farmer, risking as much if not more capital. 

 

There are so many things about how the finances of farming are mismanaged that I am amazed it hasn't collapsed sooner. 

 

btw, about a deal with China, the main beneficiary will be beans, it will have little impact on corn. Personally, once everything gets sorted out, the tariffs will hurt the Chinese consumer and really won't affect anyone else. The Chinese still have to eat, they'll just be buying their vegetables from a third party who then becomes your customer replacing the Chinese. But the initial pop that accompanies any announcement of a trade deal should be the bean market as that's where the tariffs have jhad their biggest impact. The was a fairly big research report on that which came out just today. 

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Veteran Contributor

Re: Floor Talk October 10

Thats cute and all but our input costs are way above the rates of the 80' and 90's so your comment makes no sense thats like buying a 85 chevy and trying to sell it now for what it was worth then with now 500k miles on it and rusted out. The middle men in the farming biz make money hand over fist just as the traders do off the farmer,farmers have no control over prices,weather,cost or rising interest rates we just take it with a smile. The local elevator at anytime if they want to make more money they can by a wider basis farmer's at no time can we ask for a higher price if we need it cause we have no control,all our inputs are controlled by landlords,seed companies,chemical companies,and insurance they go up every yr our prices stay the same or go down.
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Veteran Contributor

Re: Floor Talk October 10

That's cute and all, but the market doesn't care, traders don't care, government doesn't care. 

 

You as an individual need to make a decision, utilize the financial instruments that the larger farming conglomerates are doing or stop farming before it breaks you. 

Cborman, you and I have gone around in circles on this. Yet you continue to farm even though you insist that it's a net loss every year! 

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Veteran Contributor

Re: Floor Talk October 10

Again GFYS you little ***** stain
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