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jennys_mn
Veteran Advisor

Jens AM Weather

Weather is pretty benign again this morning. A small front comes through on Friday connected to a low in Canada (1010mb) and produces some widely scattered light showers. A low pressure system is supposed to develop over the OK, TX panhandle a week from now. Looks to be a small system that may benefit the southern corn belt, but that's a ways out out.

Yesterday, there were numerous posts about the market sell off. Numerous posts over the last several months by myself and others spoke about "who was going to blink first". RayJ talked about all the corn he bought yesterday and Monday. That was one end users reporting. How many others probably had the same result. We farmers blinked.

Now let's maybe look at why. Us farmers do not control the market We have given that chore to others. Our price is set by people around the world, buying and selling a commodity that most don't know what it is, or how it's used - you know, "I bought some corn, Kellogg's is going to use it to make corn flakes." Whatever. These people go by charts, by what is printed and who says what about the crop. This year has seemed very different to me. I've said that for some time. This market wants to go down, and no matter what news is out there, it does. We farmers here in the US don't sell corn and beans to the world. I know I don't have a contract to sell beans to China. ADM, Cargill, and a few others have those contracts. And they have played the game of getting crops out of farmers hands for as least cost to them as possible for a very long time. This year, fewer farmers have hedged their crops. Very little new crop, corn or beans, have been sold because the prices weren't what we wanted. I personally think that prices continue to fall in the summer until farmers begin to sell, our who blinks first game. According to RayJ himself, it looks like panic selling set in. Farmers gave up hope of selling grain any higher, and sold before it went to $4.00. Now, we can give the market a little bounce, and a bunch more farmers will sell, because they got 20 cents more and didn't sell at the bottom. So, maybe in a very simplistic form, there's the catalyst, the farmers panic selling as the market goes down in order not to sell at the bottom. Now we can throw them a bone and they'll sell more. This scenario repeats over and over until at some point a percent of the corn is owned by the entities that ultimately sell it, and now it can work higher.

But then the argument is made that, we'll, we farmers should have the upper hand because we know what is really out there. Yeah, right. We're fed crap every day that we breath. From the farm market shows produced and managed by the ADMs of the world that put out their propaganda spin on where they want the market to go, to the USDA that puts out maximum production reports to keep the prices in check for as long as possible, to reports of China canceling boatloads of beans that there is no way to verify if that really happened or not, to boatloads of corn coming up the Mississippi. Everyday it' some new crap, every year it's the same thing. And we farmers allow it to happen. Why? Because we have given away our marketing and now are being abused by the few that control the system. As farmers we can't win. At some point, we have to sell to pay our bills. We know that, they know that. We lose. If we don't sell, they simply have less, and shutter the plants, the price goes down because the plants are closed, and we lose.

And we farmers have the upper hand. In a pigs eye. We have become surfs, and don't even know it.

Jen
9 Replies
c-x-1
Veteran Advisor

Re: Jens AM Weather

Surely the old crop party is not completely over yet.....especially beans and meal.

 

Ray, are you talking today???

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jec22
Veteran Advisor

Re: Jens AM Weather

I will don't need to worry about marketing mistakes.  Ray buying one million bushels of corn Monday, losing both on basis and futures big.  Now that is serious money.  Not a job for the faint of heart.  Sounds like he had plenty of company.  The bean  guys that bought Monday really have to be sick. 

 

 

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NDf
Senior Contributor

Re: Jens AM Weather

Jenny if we farmers are surfs then we must be some of the richest surfs in the world. Selling corn for some of the highest prices ever paid for corn and beans isn't panic selling it  is just the realiztion that the supply and demand for the next crop isn't going to be nearly as tight (corn anyway)  as last and there's no sense in letting the 2 dollar premium slip away.

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jennys_mn
Veteran Advisor

Re: Jens AM Weather

I guess we're rich - but compared to what? That's the question. What's our ROI compared to those that handle our grain? And, what do we gat paid per hour over our ROI?

Jen
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farmer46
Senior Contributor

Re: Jens AM Weather

I believe the business Ray is in, makes a contract on finished product and then obtains the major portion of the needs to fill the contract at a profit. When all the pieces fall into place, it does not matter really what Ray pays for corn, only that the finished product is produced at a profit.  Now getting the contract can be the hard part, if your production costs are too high.  Some finished product contracts are mostly based off a moving scale of cost of Corn and energy.  But, I may be totally wrong, and It would not be first time.

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timetippingpt
Honored Advisor

Re: Jens AM Weather

Jenny do you really want to go down the ROI road? GRAIN Farmers ROI is simply much larger than most businesses, frankly it is huge and has been for 7 years or more. The end users willingly paid over $8 last summer. IF you didn't sell to them when they paniced it is not their fault. That was panic buying and farmers loved putting it too them. The worm turns of course but that does not give you the right to blame them for only paying $6.60 for corn today (roughly 165% of the Cost of production or a 65% gross margin on all costs).

 

Sounds more like you were simply wrong on the weather, took your position, and it didn't work out. We all make big mistakes, nothing to feel bad about that, but blaming poor Ray for buying a mil bushels that someone wanted to sell him is not justified in the least. Think how he must feel about the $8 corn he bought last fall (assuming he wasn't hedged which he probably was)

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Blacksandfarmer
Veteran Advisor

Re: Jens AM Weather

Jen, you have been playing this game a long time.... Panic in the market equals opportunity for farmers. The market has no reason to panic yet. If the late planted crops in the US get frosted off, the market will panic. If early frost doesn't come, then we could end up with a decent crop overall. You would have to expect the market price to move lower at some point in time with the possibility of a good new crop coming.

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jennys_mn
Veteran Advisor

Re: Jens AM Weather

Time:  I'm not blaming Ray for anything.  Farmers came to him - it's their choice.  But I do take exception to what you said about the possibility of marketing grain at the high.

 

Do you really think that every grain farmer hits the top of the market every year?  You're dillusional.  How in the world would you ever have the possiblity to hit the top year after year consistantly.  You'd have to be even better tha Hillary.  I guess I need to consider myself a failure, because I didn't develop the necessary contacts that would allow me to do the inside trading necessary to hit the top every year.

 

I can't argue and say that I didn't make money on the farm the last 5 years.  But when you consider that I had 30+ years on the farm, I can tell you my ROI was negligible at best.  The only reason that I am able to retire somewhat comfortan=bly is because of my working off the farm and the appreciation of my land values the last few years.

 

You're figures are so squewd.  Not everyone farms 200 bu. land in Iowa that his been handed down from his daddy's daddy.   Not everyone's production costs are those of someone who farms 5000 acres.   You're ROI numbers are a good fiction read, but beyond that they are worthless figures. 

 

When I see million dollar houses on every farmstead in the country, then I'll know that farmers are making the cost of production figures that you are citing.  Look around.  What do you see farmers living in.  How many farmers do you see taking lavish vacations.  How may pools and hot tubs do you see in farmers back yards?  FArmers are frugal, because by and large they have to be.  We keep all sorts of junk around because we might need it in the future.  If we were making all the money you claim, we all would just go to town and buy what we need new.

 

I'd like to see your grain marketning skills.  Print them here, like I have.  And let's see how good you do. 

 

Jen

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jennys_mn
Veteran Advisor

Re: Jens AM Weather

And, I guess that all these farmers selling are also extremely poor marketing greedy farmers too. You just also slapped each one of them in the face.

Jen
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