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Veteran Advisor

Good news for 2017 ?

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8 Replies
Senior Advisor

Re: Good news for 2017 ?

El chep  -  Reading in farm news KRVN Radio that Smithfield might be canceling grain contracting with CHS  ? ? 

 

SandBox playing getting a little rougher maybe ??  

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Advisor

Re: Good news for 2017 ?

Simple planning in the face of unbridled capitalism. Danger of difficulty in the form of regulatory or political barriers drastically reduced by current developments.

 

Those who could be most affected voted overwhelmingly for that. 

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Honored Advisor

Re: Good news for 2017 ?

k-289 do you know any more on that story?

Doesn't this article relate?

 

http://factsreporter.com/2016/12/30/smithfield-foods-nysesfd-to-purchase-directly-from-farmers/

 

I don't see how this hurts producers a bit.  Rumors here are that grain brokers own most of the grain in storage now.  Compounded with the basis problems, it sounds like a wise move for them to circumvent the manipulation of supply and price...  Monopoly control of grain supply will force it.

 

I am afraid it will be the future---- survival production may depend on a relationship with the end user.

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Veteran Advisor

Re: Good news for 2017 ?

What do you mean by "grain brokers"? I don't know of any brokers who own anything for more than a trading day or so. Brokers are always moving the stuff. What do they want with a train load of corn? Circumvent the manipulation of supply and price? What does that mean? Who is manipulating the supply and price?
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Advisor

Re: Good news for 2017 ?

You provide an answer in some if not great part to what you asked me last week.

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Honored Advisor

Re: Good news for 2017 ?

Here is my current example without getting too revealing, but is based on a trade taking place.....

 

Corn is picked up at a elevator system called E(coop).   Independant trucking firm M...   Delivered straight to one of Feedlot C's facilities.  Corn is ticketed to apply to the contract if Entity B( not the coop E or one of their customers).

So I assume B looks like a "Broker" of grain to me and is not the Coop E.  Those are the things I know.

second hand "here say" says the whole ground pile will go to that contract......This is the first thing I cannot verify as fact.  

And the rest would be speculation.  Things like what day did "Broker" B acquire ownership of the grain it is selling at C.  

 

My assumption is anyone who buys grain for resale is a broker of grain.  And if this person or entity has no elevator, never stores the grain in an owned facility, but has a contract to deliver, the ability to pay storage and their checks don't bounce-- no one complains... Could be a third party facilitating the clearing the grain to meet a loan guarantee.  could be a spec trade by an investment club buying at harvest with a corn basis contract where they feed cattle.  Lots of ways to broker(sell) grain. 

Larger feeders like the C are large and have their own buying division for grains and feed ingredients... they take in  200K of corn a day at their locations.  another Company I used to sell to was an independant lot at 60k head in one location.  A wonderful lady who used to be a Cargill elevator manager brokered grain from an office in her house for years for that particular lot.

 

Sometimes they are larger regional elevator groups like a Bunge or Cargill who do not opperate in the area.  Sometimes just locals who have a long term agreement with an enduser but don't produce as much as they once did .... or a volume deal they need to complete and hold on to, because those contracts are not always available.  

 

 

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What do they want with a train load of corn?   10 to 20 cents per bushel

 

 manipulating the supply and price?  My thought there is the fact that full elevators and ground piles can be owned (or on contract) by end users direct or by third party and still be considered to be full and unmarketed in reports and press releases as long as a slight amount of storage is being paid.

 

In an area that feeds three or 4 trainloads a week the normal basis swing from harvest can be 60 cents positive on corn annually like clockwork.  Usually beginning within a few weeks of harvest.  Even though we raise a lot of irrigated corn at high yields, we are grain short by May and June.  We have a terminal here locally to receive corn(and now DDGs) rather than ship it out. 

 

If you can lock that basis down at harvest levels for an extra 4 months it is worth doing.   Who would do that??   

 

 

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Honored Advisor

Re: Good news for 2017 ?

Bruce maybe this speaks to what you are refering too..... on the issue of smithfield's comment...

I don't see how it has any affect on markets, bushels are going to be eaten.  But it speaks to something I have noted before,  If you have an opportunity to have a relationship with a good end user, I think it is wise to get one established for at least part of the crop.

 

IMO, this speaks to the same issue as the Chipotle advertising campaigns.  for one  and several others are trying to market their products as wholesome and direct from the farm--top quality.  Quality stuff handled by folks who care... on and on and on.... as long as it works.

 

And it would be my move as well in their shoes.... I see Beef feedlots quietly doing the same... Contracting from suppliers they know and have a history with.... can take you to the field where the grain was raised...ya da ya da ya..

 

Who would you buy your feed ingredients from, the farmer who spent an extra hour setting his combine for best results or the entity that is going to blend it to move it.  Or blend the left overs from last year.

 

When I raised premature pork, I did not keep my worst corn field to feed.  I wanted the best performance in both places.

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Veteran Advisor

Re: Good news for 2017 ?

Yes, the big corps want to be able to "tell a story" and say "this is your/my farmer" with traceability available by clicking your smartphone on the code on the side of the can or package

 

sustainability is the latest buzzword, but all the big corps have a different definition which means that idea is still in the "herding cats" stage......

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