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BA Deere
Honored Advisor

Jon Phipps on "Fake Grain Robbery"

I didn`t sell any beans just before harvest to get hooked on the $8.75 price, I sold for 10 bucks, could`ve waited for $13 but I won`t go broke selling for $10 off the combine.  Chris Robinson was on Market to Market answering a lucky young farmer that still has his beans in the bin unpriced who was wondering if he should sell after the buck sell off.  Well, $12.50 is much better than the $7 that many were predicting "buy a cheap put or it`s hard to beat a good cash price" And no one`s going to say $12.50 is a bad cash price.

Here`s John Phipp`s take on what many of us throw around great grain robbery..makes you think.

https://www.agweb.com/opinion/fake-grain-robbery

Recently I read a curious article from a respected market analyst that referenced the Great Grain Robbery in the early 70’s and compared it to the recent soy purchases by China. For you of tender years, a short history. The Soviet government realized in 1971 that their “black earth belt” was in drought and began negotiations with the US to buy wheat. Eager to unload US surpluses negotiators from our government and private traders discounted reports of production problems and agreed to sell grain on credit and subsidized to the Soviet Union. When the global grain shortage became obvious, wheat prices skyrocketed, raising food prices. However colorful this label, it is inaccurate. No guns were pointed. In fact, US farmers were pleased with the sale, and the USSR largely fulfilled their part. The complaint that the Soviets withheld information is laughable coming from caveat emptor capitalists. The characterization of this event as a robbery is clearly whining by farmers and merchants who sold before the price surge. Sounds familiar right now. The article noted that while the US publishes grain production and inventory numbers, China does less, so they enjoy an unfair advantage. The idea that such detailed information even exists there is questionable. Only about ¼ of Chinese grain deals are by government entities, the rest by the same merchandisers like ADM and Bunge as we deal with. Talking about “China” buying and selling commodities is misleading at best. It’s the sum of separate deals by many buyers and sellers. Besides, haven’t we been griping about China not buying all their Phase One commitments? Maybe we need to pick a side!

Nobody made me sell my beans at $10 last fall. In fact, I celebrated. The idea that if US farmers had more Chinese ag data, they would make more money is debatable. Criminy, we don’t believe our own USDA numbers when they disagree with our market plan. The article hints that this information asymmetry means we should have policy to prevent the US from running out of supplies. Which can’t happen, of course. Such a market intervention sounds like an embargo – a terrible idea that’s never worked. There are users with money all over the globe who need more than we are currently supplying. The fairest way to allocate those temporarily scarce resources is to protect individual freedom to buy and sell. The bottom line on this sellers’ remorse is unless the settlement check bounced nobody got robbed by anybody. In 1972 or 2020.

8 Replies
gurly3801539
Advisor

Re: Jon Phipps on "Fake Grain Robbery"

While I enjoy Phipp's sense of humor it is no surprise he is one of the people telling us how wonderful and fair China always is. We need to believe that now.

0 Kudos
rickgthf
Senior Advisor

Re: I notice that Phipps doesn't once mention SA weather

It's not a secret that the Chinese have been buying beans all fall about as fast as they can get ships to load them.  Some grain robbery, right in plain sight, they didn't even wear a mask.  Most of this market is due entirely to the lack of rain in South America and the recent correction due to the fact they're finally getting some.

  And you know what's even more interesting, "managed money" and "other reportable" have been going long since last June.   By the time it got dry in SA, they already owned a good share of this past year's crop.  Maybe the question should be what did they know and when?

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wrightcattle
Veteran Advisor

Re: I notice that Phipps doesn't once mention SA weather


@rickgthf wrote:

It's not a secret that the Chinese have been buying beans all fall about as fast as they can get ships to load them.  Some grain robbery, right in plain sight, they didn't even wear a mask.  Most of this market is due entirely to the lack of rain in South America and the recent correction due to the fact they're finally getting some.

  And you know what's even more interesting, "managed money" and "other reportable" have been going long since last June.   By the time it got dry in SA, they already owned a good share of this past year's crop.  Maybe the question should be what did they know and when?


 

It Is what it Is. 

Doesn't matter what they knew or when. 

Grain been way cheap for a long time.  Times Change. 

0 Kudos
rsbs
Veteran Advisor

Re: Jon Phipps on "Fake Grain Robbery"

 

gurly3801539
Advisor
Re: Jon Phipps on "Fake Grain Robbery"

While I enjoy Phipp's sense of humor it is no surprise he is one of the people telling us how wonderful and fair China always is. We need to believe that now.

yeah, Gurly, I liked Phipps a lot better when he was doing his humor schlick and leaving the political and financial commentary to others.

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BA Deere
Honored Advisor

Re: Jon Phipps on "Fake Grain Robbery"

John Phipps was a host at a Ag Summit and I talked to him, a nice guy.  Then when his John`s World  commentary was on tariffs on China, I couldn`t take it so I emailed him and he emailed back and I joked "Even if you don`t use my letter, you can still send me a coffee mug  Smiley Happy "  He said send me your address and you`ll get a mug and sure enough he sent me one.    I do disagree with some of the things he says, but he`s the kind of fellow you can both disagree without being disagreeable with.   Kind of rare these days. That square handle cup he says was 1¢ less expensive so he`s a bit of a cheapskate too   Smiley Happy

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sw363535
Honored Advisor

Re: Jon Phipps on "Fake Grain Robbery"

Jon. If your accurate “Russia had no information and the US had better information” how did Russia see shortage of wheat coming and the US did not?

the article dances in circles.  How could the US agreed to finance that large a purchase and not known the affect on the market.   

BA Deere
Honored Advisor

Re: Jon Phipps on "Fake Grain Robbery"

SW, I wonder if the Soviets weren`t a convenient scape goat for what the 5 big grain companies were actually coining money on?   I`m reading this book and am only 20 pages into it, but our guys "Alan Greenspan" being one who knew there was something up with the USSR as they were selling gold to Switzerland big time ahead of the purchases.

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sw363535
Honored Advisor

Re: Jon Phipps on "Fake Grain Robbery"

BA   i have spent time in that book....  It is great history and makes the present easier to understand.

Also it helps understand the difficulties historically of large volume commodity trading.  Agriculture has its own Rockefellers and Gettys.

Congress has a long history of close cooperation and asssociation with large international entities.   Something we seldom hear about is the struggle of Ted Roosevelt had  to try and break up the monopolies in the late 1800's and early 1900'd. Congress was in the way as much as if not more than helpful............... Congress humans seem politically always "for sale".  Purchasing support in congress is far easier than electing wise representatives( and probably cheaper).  Until we have to depend on them to make wise decisions.

"There is nothing new under the sun."  Solomon