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12-20-2018 09:33 AM - edited 12-20-2018 09:35 AM
the export numbers meet or exceed the expectations for the last couple of weeks..however there is always an excuse for the market to go lower... todays numbers:
Corn= 2.516 million metric vs. the trade’s expectations of between 2,300,000-2,900,000 mt.
Soybeans=2.962 mmt. vs. trade’s expectations of between 2,100,000-2,700,000 mmt.
the first reaction is lower... because EVERYONE has those numbers were already 'figured in' what the hell will it take to break the sideways pattern to the upside...
seems to me that we are selling our crops at bargain prices....
12-20-2018 10:19 AM
The market is simply confirming what the crop reports keep saying...there is a lot of corn sitting in silos and elevators in the world right now. Until those numbers say the available supply is less than what is now believed to be the case, its going to be hard to get enough buying to push prices much higher.
I have said it before and I'll say it again : the Corn farmers of the world are victims of their own success. You plant right up to the road line, use every available acre, produce as much corn as possible, and then you wonder why prices continue in a six-going-on-seven year bear market for the product. On top of that, the talk in the industry is that there will be significant re-deployment of soybean fields to corn fields in 2019, due to the effect that is perceived from the tariff war between the US and China.
So you have had two great growing seasons in a row, and the prospects are for at least a shot at another big year in 2019...and you wonder why no one is rushing to buy and push prices higher ? China is killing the world economy right now, and the Federal Reserve is helping them do it. For oil prices to fall $30 in less than two months, especially when there was no available capacity to pump more oil when the prices started falling, tells you that there is something huge going on in China right now that is closing factories and exerting huge downward pressure on oil. On top of that it seems that China stocked itself up to the ears with corn during the last year or two. So you have one of the largest consumers of corn deep into a huge economic slowdown and already possessing all the corn it will need for a years of three. That's not the kind of environment that is conducive to higher corn prices. So in the absence of any sensible explanation for why prices should be rising in this kind of environment, the people who think corn prices should be higher trot out the old seasonal effect excuse. They should remember that past performance is no guarantee of future outcomes.
Corn has been in a range between $3.65 to $3.85 for three months now, and there really is no news that should cause it to change, Barring a natural disaster of some kind, the next big thing in corn will be when the elevator storage bills come in, and then the downpayment for loan money to buy supplies for the 2019 growing season. Neither is good for prices. The technical indicators in the corn market all say the market is over bought and needs a downside correction, which started a few days ago. Until there is some kind of bullish news, like a revisions to the crop reports, I can't imagine what would make the long term down bias in corn prices to reverse and become bullish. Its going to happen sooner or later, but right now it does not seem like today.
No one would be happier than me to see corn prices enter a long term bullish cycle. It gets very difficult to make money while a commodity trades at near its price point of production in a long term bear cycle. But going against the trend is a recipe for disaster, and I try to stay away from those kinds of dangers. I would just remind you that it was not all that long ago that corn prices were locked in a long term range-bound market that saw prices stay in the $2-$3 a bushel range for nearly 20 years. As such, its difficult to argue that corn prices are at bargain levels now, more than a dollar per bushel higher than their former long term price range.
12-20-2018 11:24 AM
12-20-2018 11:34 AM
Oh please, the laws of economic nature are simple and finite. Prices fall when supply outstrips demand, and that's what's been going on in corn for almost seven years now. When was the last time that corn farmers deliberately decided to reduce their acreage to push up the price ? Instead, as the costs of production and land costs have risen, farmers have decided that they only way to pay their mortgage, rent, and production costs is to grow more corn, hoping to increase revenues to pay the bills. And its caused prices to fall, more than offsetting the increased volume of sales.
You're not being punished for doing your jobs, you're being punished for poor business practices as a group. Stop buying farm acreage at prices that are way too high for you to make a profit. Form an association of corn growers like OPEC tried to do with oil producers. Make recommendations on how much corn should be produced per acre in order to get the price up to where you want it to be to make the desired profits. And then stick to the recommendations. You have to do it voluntarily or you'll be accused of price fixing, but that should not be a problem if you all stick together instead of thinking only about yourselves.
Short of figuring out a way to use corn in a new way that will stimulate greater demand, or a large increase in inflation or population growth, that's about the only way you're going to see prices rise. You are doing too good a job, and the supply you grow is greater than the aggregate global demand. Do a little less good of a job and start being more attentive to the economics of your business.
You can live in denial all you want, but the true bottom line is what price the market decides your product is worth. And that price ultimately is determined by how badly the users of your product need it at any given time. The market has been telling you for years that it doesn't need the amount you are supplying, so stop fighting the market and start listening to it.
12-20-2018 11:44 AM
If we're going to have a conversation about oil and gas, let's be honest about the facts of the matter. Oil prices hit a multi-year peak in early October of this year, and have been falling only for the last six weeks. Gasoline refiners buy their oil months before they refine it so as to be sure they will have the oil they need in the future. By the time the oil gets to you as gasoline, its probably six months from when it was originally contracted for purchase. Which means that the gasoline you are buying today is based on where oil prices were about six months ago. That's why you have not seen as big a drop in gas prices as you now are seeing in oil. Gas prices in the spring of next year will be a lot lower than now, because that gas you will be buying in June is based on the price of oil today.
This is also why when oil prices start rising, the gas prices take a while to increase.
There is a different dynamic to pricing in natural gas, prices tend to react much quicker because there is not nearly as much processing from the time you take it out of the ground until the time it comes to your home to heat your house or cook your food. But there are other issues that distort that market, which makes natural gas prices tend to move in the same direction as oil prices. As oil prices move higher, there is a tendency for people to switch over to gas, which is why natural gas prices rise in tandem with oil prices. What you do find is that natural gas prices rise less than oil prices when oil is going up and usually fall more than oil prices when oil prices fall.
But pricing still comes down to supply and demand for each commodity.
12-20-2018 12:01 PM - edited 12-20-2018 12:02 PM
you are right in one aspect... farmers will always bid themselves to poverty to obtain another piece of property to farm be it rent or ownership..
they do as eternal optimists ... things will always get better...
that is not the attitude in the markets we sell our crops or livestock... the attitude in those markets is ... there is plenty of -- name the commodity-- now and if not there will be plenty in the not to distant future somewhere in the world...so let's see how cheap we can buy -- name the commodity-- in order to keep the plant running or our need met...
in the meantime it doesn't matter how much has been taken off the market now because somebody still has what we need
it's the it doesn't matter how much is taken off the market we will wait attitude that bothers me most ...there is that carrot dangling out there that prices have bottomed and are bound to go up if we sell a little more now and take it out of the storage supplies... you should be glad that we are optimistic about the future .... I just wish the end users were just a little more pesimistic about the future supplies.. we just need our own excuse to change their attitude.
12-20-2018 12:40 PM - edited 12-20-2018 12:40 PM
You want to light a fire under their butts, hire a pr firm to announce that a new corn grower's association had formed and they intend to cut corn acreage by 20% next season.
You'll be limit up for a month.
hahahaha, now that would be justice !