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jrsiajdranch
Veteran Advisor

From the parlor pit 2-1

When I started this little post I never thought I would get so addicted to writing about this stuff. I have certainly posted less in it then I used to largely because Contrary to the rumors I do have a life, and I try to get some farming done every day.

Alot of what I post about here really does come from my parlor pit conversations with my dad.  He's a good duy and I have done my best to train him well! Smiley Wink  But last fall he started educating me a little more about inflation. He's a wise man.  Very visionary. 

This morning we were talking about this whole Egypt thing. and what really is at the heart of it. It really is about food prices. and food prices are higher because of our dollar policy.  I know I have bashed ethol a lot but make no mistake the higher food prices needs to be laid squarely at the feet of stupid monetary policy.

Now there is never one reason for any crisis and you can certainly be justified in blaming it on a younger militant Islamic faction as well.

But the way to control our dollar inflation is to get our debt under control and When Boehner got speaker of the house I was very afraid that we would not control spending . It looks like he has caved on the debt ceiling so inflation is gonna be real for quite awhile.  That means commodities are gonna be on a ride for quite a while.  This means don't lock yourself out of profits.  That means that we need to realize the greatest risk now may be hedging ourselves out of profits. In other words you might just want to stay off the boards.

 

Now because this is usually about dairy lets get back to the topic.

 

Is there inflation in the milk mkt.? You tell me.

 

But the milk pricing system is so screwed up guess what happened to our price at the farm? It went down!

Farm profitability tightened this month according to USDA’s “Ag Prices” report
released this afternoon. Corn price averaged $5.37/bushel, up 55¢ from December.
Soybean price jumped $1.00 to $12.60/bushels while alfalfa hay price remained
steady at $121/ton. Meanwhile, the All-Milk price for January was estimated at
$16.20, down 50¢ from last month. This put the “Income over Feed Cost” at
$7.15/cwt., a decrease of $1.12 from December (

 

SO right now all the Dairy groups are trying to find a way to get government to give us a taxpayer assisted income protection scheme. I keep saying that I do not understand why they don't just allow us to use the CME to price milk. I know that would eliminate all the groups that have an investment in getting government more involved on our lives but is that all bad?

 

You folks be safe and stay warm today. JR

 

 

 

 

    


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14 Replies
k-289
Senior Advisor

Re: From the parlor pit 2-1

Reminds me of the beef check off--afraid of transparency and of the lid coming off !

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Blacksandfarmer
Veteran Advisor

Re: From the parlor pit 2-1

JR its good to have a dairy mans opinion of things here. I don't agree with all of the ethanol bashing mainly because I hate giving money to the oil companies and letting that money trickle into the pockets of people who hate the US. I would have to agree with you on the fact the farmer can be his own worst enemy in price situations like this, Im one of them. I sold grain much cheaper than it is today but at the time I thought I was getting a good price even though I sold myself short. Oh well if we all had crystal balls to see the future with, guys like me might be somewhere warm and sunny instead of waiting for a blizzard haha.

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GoredHusker
Senior Contributor

Re: From the parlor pit 2-1

I remember a few years back when guys were pretty green in the gills for selling five dollar corn when it was approaching eight bucks.  By harvest, they were all smiles again.  I also remember guys being hedged at five dollars who pulled those hedges at seven dollars and then sold sub-three dollar cash corn.  What someone has to ask themselves in these markets is whether they're a hedger or a speculator. 

Mike M2692830
Frequent Contributor

Re: From the parlor pit 2-1

Hey Gored, I don't want to start a hedge/speculate controversy here. Don't we all speculate in our own operations? No matter what decision we make(making no decision is a decsion in itself), isn't that based on a speculation and sometimes there is no hedge against the decision..like weather. Corn in the bin and long on the board is speculation. More banter on a snowy day. Hope you are reading Rex....MikeM

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rightone
Veteran Contributor

Re: From the parlor pit 2-1, JR the dairy

groups are simply trying to follow the NCGA model.

 

It's no secret the ncga had major input in writing the 08 farm bill.

 

Govt mandate such that the govt eats so much volume of dairy products annually.  Why not? the model IS in place...just a matter of expanding the industry segments now.

 

Problem of course is that BIG interests can buy more dc thus have more influence. 

Thus the dairy mandate could be comped by a CASH paid feed per unit govt subsidy too ( thus when feed is a certain index of expense the govt offsets that production cost..so the dairy can simply milk on in a FACTORY setting ( same as the bigs do today )

 

Dairy is expanding...and the usda indicates MORE dairy cows online ending in 011 than there was in 010.

 

OR do they just combine the afore and vala....a Dairy Revenue Assurance program, insurance paid per cow annually by the producer...thus eligible for revenue pay back every quarter or semi annually formula based on the feed index cost .. ratioed to the farm's production mandate ..ratioed to total production .. then ratioed to the supposed real dairy product market ( now more truely an after market so to speak ).

 

The govt likes programs like the afore...and most agri operators....well long as there's some dough in the whole deal, govt is a reliable provider of dough and policy for agri.

 

On Egypt...the root cause is poverty..NO economy that simple.

Egypt has an annual income of say $1,550 US dollar per capita. 

It's a trickle down system thus 80 to 90% of em making in the $500 per capita range....the rest the money is income for those 5 to 10% of more connected folks at the TOP.

 

When folks make REAL money they afford food no matter what food costs.

 

Government's job is to provide REAL economic opportunity for folks. 

Trickle down systems ( dictatorships or supposed democracies both ) that do NOT have money policies structured to work for the lower classes Always FAIL or CHANGE.

( over 3,000 years not one govt on earth that gyps the supposedly lower classes of people succeeds...those govts either change or fail it's that simple ).

 

Times changing.  The World map will have different names on many spots in the next 5 years.

 

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jrsiajdranch
Veteran Advisor

Re: From the parlor pit 2-1, JR the dairy

Mark I couldn't agree more well mostly with what you say.

 

Dairy cows will be lower going forward.  Interest rates will dictate that. Money has been to cheap for to long.

 

YOur right about the mandate model having been the new fair haired maiden of DC. The problem is that as a patriot of the old school type I despise this move to income redistibute so boldly.  And who are we going to get mandated consumption? We are not so what we are going to do then is to subsidize the export shipmenst that is what our currrent CWT plan is all about. Call it a producer funded pilot program.  Dairying will change for sure it is going to go the way of big corn. Just one more reson to dislike NCGA FB and NMPF.

SO I will continue to rant that the answer is the free market. THe one thing that will stop this tho is the higher taxes that are coming to fund all of this.  I don't think most will go for it.

THe snow is deep and light and moving fast. Spring is not that far off now.

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kraft-t
Senior Advisor

Re: From the parlor pit 2-1

good comment!

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k-289
Senior Advisor

Re: From the parlor pit 2-1, JR the dairy

JR did you see the Marshall deal on the SD bankrupt dairies---guess one can get big and fail--why it looks so cute to be BTO and put a black eye on ag. this way is beside me--if some one didn't continue these operations-who would clean up the mess ---$$$ wise or environmentally --wow what planning !

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Palouser
Senior Contributor

Re: From the parlor pit 2-1

You'll have to explain the mechanics between out $ policy and the price of grain in Egypt. Frankly I don't come close to buying your thesis.

 

I was talking to an AZ son of a multigenerational farmer, who is now a hydrologist. At one point in our discussion of farming and farmers he laughed and made the statement, "If there is one thing I learned about farmers growing up it's that it's always some one else's fault, always a conspiracy."

 

Believing the US $ policy is responsible for everything is one thing. Proving it is another. At this moment it is a hard sell showing that impact on the consumer. Yes, oil swings, and so do other commodities. Always has, and we're not going back to $25 oil - ever. Look at the price of oil now vs any yesteryear, plug it into a consumer price index and you'll see that the price is not out of line. In fact US industry is very much more efficient that it used to be with energy and it is a smaller part of production costs.

 

Look at fundamentals when it comes to grain prices. Supply and demand easily explain current prices.

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