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Senior Contributor

Is it just me?.......

I hear people talk as every one is bullish...Because of this we must be ready to go down...... There is no bearish news...... We must be at the top....... Look out below we been here before....... I will go on the record today and say NO...... WE ARE NOT AT THE TOP.......

 

Hear is why I feel this way......


CORN USE

Lets take feed....... Last I looked the livestock prices were on fire going up not down..... To me this does not sound like with the prices going up they will be getting discouraged...... Heck... If they have done a good job of covering there expenses looks like they will do quite well..... No slow down from the feed sector as of now......

 

Ethanol...... Good or bad..... The ethanol industry is grinding at a rate of 200 to 400 mil bu per year HIGHER than the last USDA report...... NO slow down from this sector.....

 

Exports..... World demand will be coming to the US as there just is no other ample supply of feed available until next summer...... Unless we hear of the world cutting back on there livestock #'s No slow down hear..... One could debate that the USDA will be to low on there export number (China)......

 

Production..... SA corn production is today at risk...... Time will tell.....

 

Beans..... Exports speak for themselves....... SA weather less than Ideal...... Time will tell.....

 

All I can say is that Until DEMAND is slowed down DRASTICALLY ....... We will just flat run out..... The market will not let that happen......

We have not had the market capitulation that always occurs at the top...... We have not had that...... We have not hardly gotten back to the highs of November...... Pay attention to demand...... When there is concrete evidence that it has slowed...... Then we will be at the top..... I do not see that today...... FWIW...... p-oed

 

 


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8 Replies
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Senior Contributor

Re: Is it just me?.......

Marketing these days is like a game of "liars dice" no one knows what`s really out there, you just have to make an educated guess if "$6" is high enough or call "Baloney!!" and sell. The way it looks the odds of the market really falling out of bed ie, $3-ish isn`t that great, so let`er ride. I do know there are no market advisors qualified to help a person in these markets, oh sure they`ll cover you in options but giving good advice? Do something reliable like throwing darts. I canned my advisor calling "baloney" on him last summer was the smartest thing I`ve done in a while. Jim Bower on US Farm report said a couple of his clients, on their own are sold out on `11...for what it`s worth.  

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Advisor

Re: Is it just me?.......

The common way of thought is that when most are bullish the market is topping.  But, anymore, who knows?   Certainly not I.

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Veteran Contributor

Re: Is it just me?.......

One thing I have noticed in the last couple of weeks is the margins for hogs, cattle, and ethanol went negative quick.  Doesn't matter if they don't stay negative but it looks like the market is trying to slow down grain usage a little bit.  I would think that when it comes to the Jan report there wouldn't have been anything that should have showed rationing (other then USDA finding our 300 mb of corn again) but looking forward your starting to see it. 

I would think we would start rationing corn in a big hurry if we put another $1 on corn but that would assume that we don't see a trade like 08 when everything was going up if that happens we keep rationing corn at a higher price.  One thing we didn't see in 08 is how the government would handle high price grain.  You started to hear some rumbling but we were there for such a short period of time that nothing came of it.  If grains made it back to their highs and stayed there I would think there would be a lot of risk in the government doing something about it, mainly in the area of ethanol mandates.  Cut %20 of ethanol demand and your balance sheet looks alot different, or put quotas on bean exports and that balance sheet looks different.  It will be an interesting next couple of months.

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Senior Contributor

Re: Is it just me?.......

I don't follow the margins on ethanol or hogs, but I can definitely tell you they are now currently negative for cattle.  What's even bigger is that fat cattle prices are now in huge jeopardy of falling out of bed here as meat has just gotten too high for consumers.  We're already starting to see the coolers filled up even though we have less supply.  Last week, our export sales of beef were negative.  Basically, we lost two weeks of exports with the cancellations.  In 2008, everything did go up.  However, we still bankrupted one of the largest ethanol producers in the country.  We bankrupted the largest chicken company in the country, etc.  I read an article today that basically states we're in the eye of the storm with regards to real estate forclosures.  It's estimated that we'll see more homes foreclosed on in 2011 than we did in 2008 or 2009. 

 

If we could just pick up another 20 cents or more in the 2012, 2013, and 2014; it would definitely be enough for me.  Reading the charts, I'd say there is a decent probability of one of the front month contracts getting close to $7.00-$7.15 depending on how fast we rise.  This should give me a pretty good opportunity to lock in $5.00+ cash for the next four years.  If my charts are correct, 2011 will be the last year of these prices for quite a long time.   

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Senior Contributor

Re: Is it just me?.......

When you talk of $5 for 2012, 2013, 2014, and out....are you talking about a stable $5, ie what $5 represents today, or the adjusted for inflation value in those years?

 

I would agree that $5 corn, hedged for inflation, makes economic sense in the far out years, even if the price for 2010 and 2011 go throught the roof. The part I do not get is how anyone would assume that $5 in 2014 is going to buy what even $3 buys today. This what is driving the speculative flow of money right now...uncertainty and fear of the demise of the dollar.

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Senior Contributor

Re: Is it just me?.......

Exactly, this is why I'm taking advantage of the uncertainty and fear.  When do prices usually peak?  When uncertainty and fear are at their highest.  According to the gov't pundits, inflation is rather flat.  However, they don't put food inflation or energy inflation into the equation.  It's a calculated risk, but with the election of fiscal conservatives I think one can all but assume the 112 Congress will not allow the biofuel credits and tariffs to continue like the 111 Congress did.  With falling livestock numbers and possible falling ethanol demand,  this does not bode well for higher prices.   

 

Also, speculative money flows into commodities for a couple of reasons.  Investors can't get any return on their money from banks in the form of CD's and saving accounts.  The stock market bubble burst and returns have been difficult to achieve.  The commodity market has given them the highest returns, so this is where they stick their money.  Here's what is more than likely going to happen.  If our economy does improve, interest rates will go higher to ward off inflation.  If our economy doesn't improve, rating agencies like Moody's will downgrade our debt rating and interest rates will have to go higher much like Ireland, Greece, etc.  Either way, interest rates go higher.  This isn't exactly the first time speculative money flowed into agriculture.  I still remember Prudential owning several quarters of farm ground around here back in the late 70's and early 80's.  I remember a German investor owning several quarters of farm ground here in the early 80's.  We topped the corn market out at the end of 1980 to the beginning of 1981.  It then fell roughly 50% by mid 82' before it started to rally again.  It topped out again getting within 10% of highs established in 80-81 by mid 83'.  It fell roughly 20% but then came back for one last time in mid 84' before falling nearly 65% in value by 1986.  If you overlay the montly continuation charts from 1979-1983 and the 2006-2010, it's creepy how similar those chart formations are.  It's also quite interesting how the dollar index performed over the same period.  The dollar index bottomed in the 80-81' time frame.  The dollar index bottomed this time around in 2008.  By the time we made our second spike on corn prices in the 80's, the dollar index rose roughly 10% compared to rising 14% from 2008 to present.  With huge unemployment and such, investors were pretty shook up in the 80's over inflation and the demise of the dollar.  By 1985, the dollar had risen roughly 35%. 

 

While I don't know what prices for inputs will be in 2014, I do remember a couple of years back when fertilizer prices were so high in the fall and winter only to fall back to about half the cost by May.  I have no doubt it might cost more in the future to raise a crop because crop insurance will more than likely cost 59% more than it does today and there more than likely won't be a direct payment.  If $5.00 is the breakeven by 2014, then we are going to have millions upon millions of people in this country starving to death as well as the World.  People were worried about the demise of the dollar in the 80's.  People are worried about the demise of the dollar today.       

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Advisor

Re: Is it just me?.......

As I was working on taxes today I was half listening to Fox business news.  Some guy was on there saying how farmland is the latest, greatest investment vehicle.   Seems like I've heard that when everybody knows of a good investment it has already peaked out.   Just musing....

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Senior Contributor

Re: Is it just me?.......

Maybe a better parallel than the 1970's to early 80's would be the post ww 1 period in weirmar Germany. Read the Black Obelisk for something to keep you up at night .

 

$5 means absolutely nothing to me as a form of wealth. A bushel of corn is still a bushel of corn...five years production of corn usually buys an acre of land...etc etc.

 

If you want to bet on congress stopping the erosion of the us dollar, by all means do so.

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