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Veteran Advisor

From the parlor pit 8-18

Well folks we sure have been busy around here. Kinda tired and draggin but gearing up for harvest already.  In fact we started opening up Corn fields yesterday.  What we found is very disappointing.  Good corn from the road an it even tonned up OK but very small kernels and a rare find was a cob that had 16 rows. All most all cobs had an inch and a half of tip back.  This was on flat dark dirt that showed no signs of moisture stress or lack of fertility.  The guy that grows this stuff is a good farmer.  SO I would say for this area it may be one of the better fields.  Hard to make 177 bu yield average in Iowa if the best I have seen is 163.  In the past week I have made several trips to the south and west of me several hours and there are lots of problems out there.  7 dollar corn is justified at these yields.


So how's about dairy markets?


tuesday was the fonterra auction. It is off 24% from the highs of march. this last auction was off .9% from the previous auction.  The world is discounting the milk markets much faster than the US. WHile there have been production problems all around the globe that have caused reduced supplies they have not offset the economic woes of the consumer. 


OUr own production problems in the US are slow to show up. Or more correctly buyers are hoping that a life line is throwed to them soon so they do not have to buy product at these prices.  There is no lifeline and the rescue boats have missed them also. This market is short and no one wants to believe it.


I know many on this site have talked about demand needs to be rationed and have questioned why there hasn't been a bigger pullback in demand.


Here is a couple of points.  First most end users have gotten used to buying a price break the last 4 years in the July to Sept. time frame. Remember last year at this time corn was half the price it is now. Lots of corn would get bought up in that time frame which lowered the cost of corn but going forward show me how you can get your corn bought at a discount to todays levels?  You can't Therefore the demand destruction is about to really show up. How much corn do you think E plants have bought for sub 4?  Or for that matter sub 5?  It isn't very much. A large commercial buyer for livestock in my area only has about 10% of their corn bought for the next year.  Last year they had well over 50% already bought.  SO the decision time is now.  Are the endusers going to go for another year with this high priced corn?  It all depends on the price you can get for your end product going forward. and the livestock industry that purchases their corn can not pencil in profits with the cost verses the potential income. The demand destruction that is about to hit us is huge!


In dairy last year was actually a better year for me than this year as milk was only about 3.50?cwt. lower yet corn was half of todays price and bean meal was 35% cheaper.  DDG's were able to be bought at a steep discount to todays price as well.


Last year many thought going into the fall that this would be the year that corn broke lower or at least it didn't shoot the moon. QE2 shot this market higher and then weather fears had a new Plataea to take us up.  BUt Livestock operations don't just have a sudden death they have a time that is required to be fully liquidated. That time is almost up. How much is feed usage reduced in the next year?  I do not know but I think it will be so significant that we will actually build stocks.


I know some of you are thinking "yea but catttle placements are up" ,  Well look at the size of the cattle going into the yards and you will realize that they are small calves that are nearly starved coming off of non existent grass down south.  THose cattle will have larger than normal death loss with much slower gains. they will also have reduced frame size which will result in lower yields.


For the first time in a year Florida imported milk to meet fluid demand last week. And schools down there really ramp up this week so the full demand of the school lunch program is just now starting. ANd nationwide that phenom will grow over the next two weeks. As it does much of the milk that has been going into cheese will now be diverted to fluid milk.   That is why the recent break in cheese should be bought as it will only go higher from here. 


Texas dairies have had huge losses in milk production which will not come back for at least a year.  Out east crops are poor enough to limit expansion if they have enough feed for their current needs they will be happy.  Out west the question is will the bankers let us go for another year?  They are going to require huge amounts of capital to just keep feed bought. 


In the end the next 6 weeks will tell us alot about the next year in the livestock business. There is certainly going to be less corn fed this next year. Long term this is bullish meat, milk, and eggs. You just gotta figure out how you are gonna get to the future.  We are trying on our farm to figure that out right now.  Do we expand or do we cut back?  Is the current size the most efficient?  In the end lots of kitchen tables will be filled with cashflows trying to determine if now is the time to exit and join the cash croppers easier lifestyle.   Time will tell but I think those ranks swell in the next year.


I got lots of pics to download but I still don't have all the software on to the new computer to do it yet. Just to stinckin busy to get it done. also with everybody in my house on some kinda social media I think we need to start a number system for when you can get on the computer.  BE safe guys.

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BA Deere
Honored Advisor

Re: From the parlor pit 8-18

We`re living in interesting times Jr.  Corn with alot of eye appeal from the road when yield checked kinda goes 16x30 ears, 30k pop   times what?  90,000 100,000  120,000 kernals per bushel If it`s 100 we`re looking at 144bu/a  Uff-Dah!   There are sandy farms that are 80% fired on the whole stalk, ears drooping, Lord only knows what that`ll be. NC Iowa is supposed to be one of the garden spots.  If NCIA gets the sniffles the rest of the cornbelt catches pneumonia.  From what little traveling I`ve done, I`d peg Iowa at 155.  We`ll see. 

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