High prices cure high prices.

[peaceman]

I have sold some corn recently.  My primary concern is for the overall economy with high priced oil.  Also it seems everybody is so super bullish.  I think there is probably some higher prices to come.  I am just not willing to give up 6.15 corn for 2011.  I watched that happen to so many in 2008.  I think there are some warning flags.  I also wonder how many will capitalize on higher prices anyway.  Most elevators quit contracting grain before because they ran out of liquidity.  The whole greed hope fear cycle is in action.  We are clearly in the greed part of the cycle how long before we get into hope or fear is just a matter of time.

2 cents

God Bless

[jrsiajdranch]

Peace,  I have seen the cycle you are talking about in the past. I am not sure it relates to today. Here's why.

1. WIth the world currency girations not pricng is actually quite prudent if you do not need the cash.  The physical is gonna keep being worth more in tomorrows dollars.  Inflation is gonna keep helping you to keep your commoditiy relativley stable towards the other raw commodities you purchase.  So when you sell you must also lock up an input with physical ownership so as to keep that price relationship intact.  If you sell corn, for example, and do not purchase inputs with the proceeds you will quickly find that what todays market price willl buy will be much weaker in a month.  SO I think that folks who are holding grain may be not in a greed mode but they are in a fear mode. 

If you take the dollars loss in value since 04 and you factor that against todays corn price you find that corn in 2004 dollars would be worth roughly 3.50 to 3.75  Gasoline would be about 1.90. diesel would be about the same price. NH3 and P<K wold also be roughly about half the price they are today.  Last summer if you sold corn for 4 you left alot of buying power on the table. SO I think most are fearful that this inflationary spiral is gonna continue. If it does. your corn sale may not look so good.

I am not saying that selling is bad. I do think that with the insurance gaurauntee where it is at why sell?

Just my thoughts they have a very good chance of being wrong.

What happens to the economy is anybodys guess. ( I am guessing hades in a handbasket).

[BA Deere]

I agree with what Jr said. Your crop ins agent is your best friend this year, you will get + or - $700/a by hook or by crook. Without foreward sales, worst case senario corn goes to  $1.40 you`ll get a LDP and a fat check from crop ins. but you`ll get your $700/a. This is one of few years that in most cases a profit can be insured. Before foreward selling too much one needs to consider if there`s a disaster and corn goes to $14 and you sold at $6, the ins co washes their hands at  $12.02.  So at these lofty prices you get on the wrong side and can`t deliver...Uff Da!  Here`s a link to what happened to the Zimbabwe stock market, just looking at a chart with no other info, buying in 2007 would have been a no brainer but the currency was bathroom tissue in 2009.

http://www.goldonomic.com/zimbabwe.htm

[peaceman]

I appreciate your two posts. I agree with much of what you say. Here is a few ideas to chew on.

As far as comparing Zimbabwe to the US. They were just printing money. We can't do that.  Every dollar we hire printed is backed by notes.  We hire an independent bank to print money and issue bonds.  America has a long future.  Japan's debt situation is twice ours by GDP.  They don't have near the assets(highways, military and national parks.)  They are still chugging along. 

Corn prices are in no way adjusted to inflation.  The price levels we are seeing today are purely based on a supply and demand.  Again I think there will be higher prices, $14, I don't think so.  Most every end user will be done way before this. 

These conversations were commonplace in 2008.  I am just trying to give another side of the equation.  I still own a lot of corn.   106 oil could effect the economy and slow demand of all the corn end use outside of ethanol and this is highly political at this point.

Purchasing inputs and hedging corn is using a crush margin, this can help insure long term success.

Thank You again for your thoughts.  My theory of everyone being bullish even a livestock feeder is solid.

[jrsiajdranch]

Peace, brother,  You are really drinking the koolaid! 

The fed is printing the money and then issueing the bonds to pay for the money. They then use the same money to buy the bonds that the bonds were sold to fund.  It is EXACTLY what the Z did. Only difference is we use big terms like Quatitative Easing.  And since the world uses the dollar as it's reserve currency we casue global inflation. 

And Corn is always a hedge against inflation!  WHy else would a hedge fund buy?

Fundamentals can not justify this price!

Oh and BTW this livestock feeder isn't all bulled up. WE are so hozed!

[peaceman]

If corn were a hedge against inflation it would be way over 6 dollars per bushel more like $35-50 BU depending from when you adjust.  What do you feel  the price of corn should be today given the level of carry out and days of ending stock. 

If Bonds back debt then our money policy is transparent.  It is all backed by bonds regardless of who buys the bonds.   Zimbabwe was in no way transparent.  What were Zimbabwe assets backing there debt?  What does the Federal government use to secure the bonds that are issued by the FED?  What happens to the world if USA crashes?

Maybe you could get a piano and play doom and gloom on a hill with third eagle.JR,"Doom and gloom coming soon."

Are you really hozed.  We are making more money on cattle than ever.  More risk granted than when corn was 2 dollars.  If we were loosing money because of 6.5 corn why are we paying 140+ for feeders?

[BA Deere]

Hey Peaceman, all I can say is the only thing saving our bacon is that the US dollar is the best looking horse in the glue factory.  When oil seizes to be be traded in US dollars, that`s all she wrote.

http://www.inflation.us/hyperinflationwarningsigns.html

[jrsiajdranch]

Peace what is backing our debt? The full faith and credit of the USA!  No body is gonna come and take our highways or our national parks due to non payment.  They may be assetts but they cannot be taken.  national debt isn't the same as your collateral.  

Bonds purchased by real money are transparent. Bonds sold to fund debt by the same agency that then buys the debt isn't transparent. That is why Ron Paul wants to audit the fed. Apparently they are afraid of transperancy cause they don't want to be audited!

Here is the example of what the fed is doing. Using myself as the example

JR' goes into debt buying cattle. I borrow money from the banker. 

I pay interest to banker.

Banker never asks to be paid principle only interest.

I sell cattle and do not pay banker.

This is OK cause banker is using his faith in me as collateral.

After all I am the biggest catle feeder on the block so why wouldn't he trust me?

Banker suddenly needs his money back.

But that is OK.

I no longer have his cattle or his money and it is very questionable I can keep paying the interest on my debt which is now 4 times my yearly gross. 

But it is OK cause I have my accountant who is indeopendent of me with a printer.

He says I can help. I will print bonds from my independent bank and sell it to others to fund your debt. When independent accountant cannot find buyers he says that is OK I will print money and buy the bonds which will fund your debt. Even tho accontant doesn't have any assetts or way to produce anything or tax people.

Mister independent banker gets a nice cut of cattle when no one is looking and I get to pay off mean ole banker and independent accountant can now be my bank. 

What is backing independent accountants money?  Nothing. But according to you it is transparent?

Oh yea I have  no cattle now but a real big feedyard. 

Now as to your doom and gloom thingy yea I see dark days ahead for our country. However I do see corn continueing to move higher. I have been saying this for over 6 months now. So take some of my doom and gloom and make some money!

As to making money feeding catle. I am sure you are. I know a cattle feeder who has never lost money. OF course some years he only charged 25 cents for his corn!

Finally inflation factors cannot be purely adjusted for just price productivity must also be interjected into the equation. so if an acre of corn made 110 dollars in 70 that same acre today will make 1200 dollars an acre today.   It isn't all due to inflation there is a yield factor in there. 

Oh yea the fed QE2'ed about 6 billion in debt today.

[jrsiajdranch]

Well since I am the resident doom and gloomer I thought I would poor on some more.

We have basically 0% money flowing out from the fed to the banks. right now banks are making a killing with the diffence between the cost of thier money and the interest charged. What happens to banks when the fed increases interest and the banks can't increase interest?  I see some real trouble signs out there for banks. This one isn't gonna be pretty. And I think rural americans are gonna have front row seats.

[peaceman]

Listening to Ron Paul is about like reading some of the posts on AGWEB. 

How long can the federal government run on 6 billion? 12 hours.  1/2 a day.  Wow earth shattering. 

No doubt America has a debt problem.  You are now proving my point that we have a long future as we are the best show in town. We will be the reserve currency for a long time.  There is no sub for the greenback.  Learn to love it.

 We might not be perfect or perfectly transparent but this is the best nation on earth and more transparent than most all.  If you had more blood in the soil maybe you would be more appreciative.

Ok now on corn being a hedge on inflation I have to buy more bushels to hedge my dollar?  This is so confusing.  You are saying that it is a hedge per acre not per bushel or a combination of both?  And again do to current carryout/demand what, in your opinion would be the price of corn? 

My point on cattle is we make sure we won't make too much money by always competing too hard for feeders.

This has been a lot of fun.  I do appreciate your posts and I do plan to join in more often.  You guys can type piss and not offend me.  My grandpa told me he would rather deal with a guy that new nothing than one that knew everything.

If and When the SHTF don't anticipate being in the driver seat.  With the people of our nation and the government we will ALL and I quote be picking S^*& with the chickens.

"Doom and gloom coming soon."  Third eagle