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Senior Contributor

Re: Is Rays ship about to come in?

Is this it?

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Senior Contributor

Re: Is Rays ship about to come in?

Yes

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Senior Contributor

Re: Is Rays ship about to come in?

Notice ray that even in the eighties as cheap as corn prices where that corn never broke below resistance created in the 60s and 70s. Thoughts?

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Senior Contributor

Re: Is Rays ship about to come in?

Sure, the market found an equilibrium in the twenty year period between $2 and $3, occasionally punching through both ways, but always being pulled back to the equilibrium point. The support for that equilibrium continually exerted itself at the old high for the prior equilibrium, which was at the $2 area. Over time, the long term effects of dilution of the buying power of the dollar (i.e., inflation) moved the equilibrium range higher, as it has done once again since the early 2000s. That's why we have stayed in a range of $3 to $5 during the last dozen years, with the market occasionally punching through both the lower and upper boundaries of that new equilibrium range.

 

My feeling is that as the market punched through above the support of this new equilibrium range during the period from 2010 to 2015, we now are in a process of testing the lower end of that same equilibrium range, and will take a foray below $3 before coming back into the established range. The extremes when the market punches through its boundaries are most important, as they clear the market of excesses. That is the process we presently are experiencing, as the excesses on the supply side have to be washed out before the price can move back to the upper boundary of the range we are in.

 

Land prices and lease rates are too high, and there is too much acreage that needs to be planted to maximize revenue for the marginally profitable farmer, Once those excesses are cleared, with a move below $3 that forces the marginally profitable enterprises to fold, then the supply side of the equation becomes more reasonable and prices then can rise. What you see in those longer term charts is the graphical representation of the business cycle at work. 

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Veteran Contributor

Re: Is Rays ship about to come in?

Deasmatt, that is a very good question. North of the border I’m starting to see some large land deals posted from guys that aren’t forced to sell. Personally I’m thinking of doing the same. We are overproducing to a point that is unprofitable, fertilizer and seed companies overcharging. Hell better to get out before the bottom drops and let the BTO’s take the hit. Let’s face it equipment prices keeps rising, fertilizer keeps creeping up, seed costs... up, cost of living ....up. They keep telling me I need more land and put in more time and I need better equipment and I need the latest seed with the best genetics. Well this doesn’t seem like it’s paying off for me anymore. Maybe it’s just time for me to bow out and find something else to do before I’m forced to sell later on.
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