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marketeye
Veteran Advisor

Let's Talk Farm Markets

This week, I have had a few interesting conversations. I wanted to share some of the thoughts. And, it would be interesting to get your feedback on what was said. What do you think?

1st Conversation:

 

A Floor Trader that owns an Illinois farm:

In full disclosure, he told me that his position in the market, right now, is long corn and short soybeans. When I asked him if more farmers use the Board of Trade during low price environments (like this one) vs. times of $7.50 corn and $14 soybeans, he had an interesting response. The short answer is no, in his opinion.
"We've driven the fundamental traders (farmers) out of this market. It's mainly the funds and big money involved."
He went on, "Lately I spoke with a Northwestern professor that said he was over in China. He was meeting with traders that were simply spreading prices in China's Dalian vs. the U.S. Board of Trade, that's it. They were making a lot of money doing this, because the U.S. markets don't reflect U.S. grain reality."
He says some real smart marketwatchers are saying that Nov. soybean futures are going to $9.00.
The floor trader also wanted me to know that because the Funds are still long corn and short beans, they run up the corn market, on the close, so they don't have to pay as much margin money to their clearing house.
Note: This is Marketeye speaking now: I watched this happen on Wednesday. So, maybe he is onto something.
Now, he also shared what is going on at his farm in Illinois. He has 50 corn acres of Stine Seeds that was planted in 8-inch rows, with a 20-inch gap followed by two 8-inch rows. He wasn't exactly clear about the planting  spacing, but here is the point: "My operator tells me we could see 300 bushel corn on that field. It has high plant population. But, he also says my input bill is high too. The soil is grey, rolling timber, no-tiled soil.  Now, here is the kicker. We sold that corn already at $4.90.

2nd Conversation
A grain market leader shared his thoughts on the infrastructure issues that we could face with this year's record corn and soybean crops.
Apparently, the South's soybean harvest is delayed due to cooler weather. The basis prices are getting erratic, not knowing if new-crop soybeans will arrive on time.
He also shared that the barge capacity along the Mississippi River is expected to fall short, this harvest season. And, to make matters worse. "The railroads are just not doing their jobs. We are shipping a lot of oil that is replacing track and car availability for ethanol and other ag product shipping."

Mike

 

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10 Replies
timetippingpt
Honored Advisor

Re: Let's Talk Farm Markets

Sounds like you are talking to "Mr. Obvious Man".

 

Everyone knows the unlimited spec positions comprise most of the volume. As well, everyone knows that the electronic traders have a huge advantage, read Flash Boys for further proof. Finally, everyone knows the chinese and russians have GREAT quants that can do amazingly fast and accurate algorythms, as long as they steal US technology. Look at the COT, simply HUGE spreads being traded by quants.On top of this, off exchange transactions, like 100% of our crop that is marketing through Cargill's MN trading floor, likely doesn't see a public exchange.

 

You can't seriously blame the railroad. A few times a year shipper versus someone shipping oil every day of every week, pretty sure we would take care of the oil guy first as well. Another unintended consequence of our "beloved leader" and the decision to stop new pipelines. jmo

 

I have some cool data that will be presented at our peer meeting that demonstrates how we producers get the short end of the stick, errrr....every time. That is ok though, because the quants have one great weakness....they are truly stupid. And, I am being serious. Even the guy you are talking to is long corn and short beans. The statistics on that for the last 3 weeks of august are pretty poor, but he is a floor trader...gasp...all bow...like I said stu...     And btw, selling it at 4.90 is not that great of a result, CZ14 traded above $5 for over 3/4 the TIME it has been on the board...came on Jan 2011.

 

You wanted a conversation...so I chipped in.

 

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Hobbyfarmer
Honored Advisor

Re: Let's Talk Farm Markets

He sold it? 

 

 

All 300bpa? When, before or after planting?  Cash physical delivery contract?  I call b.s..

NCILL
Frequent Contributor

Re: Let's Talk Farm Markets

300 BPA sold? What an amazing crystal ball he must have. Must be given to traders with the other inside information they trade with
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JohnQ
Frequent Contributor

Re: Let's Talk Farm Markets


time:thetippingpoint wrote:   And btw, selling it at 4.90 is not that great of a result, CZ14 traded above $5 for over 3/4 the TIME it has been on the board...came on Jan 2011.

 



Sure CZ14 traded over $5 a lot of the time. That doesn't change the fact that he SOLD some at $4.90 95% of the people in my area haven't done squat so having corn sold at $4.90 looks pretty **bleep** good to me!

 

For those whining about him having 300 bushel sold at $4.90, how could he do that, etc, etc. Get real, he doesn't have it all sold at $4.90, just a nice chunk of it. Way more than most have priced I'll guarantee that!

 

Common sense isn't so common anymore.

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roarintiger1
Honored Advisor

Re: Let's Talk Farm Markets

"because the U.S. markets don't reflect U.S grain reality"..........Boy, is that an understatement.

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elcheapo
Veteran Advisor

Re: Let's Talk Farm Markets

Hummmmm
sounds like a witness to the commission
That the market is "dirty"

And we are supposed to out market them?

The older I get, the more cranky I get.

Imagine what I'll be like when I really
Get old!
highyields
Senior Contributor

Re: Let's Talk Farm Markets

the US markets are out of touch with reality,  and its true that farmers are not in the future markets like they use to be.   My family use to trade all the time, always made a few extra bucks that way.  But the margin calls can get outta hand in a hurry anymore.   

 

Options might be a better trick to try...

 

 

For those of you who dont' know stine seed is developing corn that can be planted this thick,,,they totally re designed the corn ear,,,the stalks are 4-5 foot tall, they can be planted upwards of 60,000   plus hes using a twin row design,  they idea is to solid seed this corn crop, since it is a grass.   So 300 bushel corn is possible,  selling corn at $4.90, he probably had futures sold at that price... good for him,,,that was a good idea...

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Silverwheaton
Senior Contributor

Re: Let's Talk Farm Markets

What is the problem with having it 100% sold!!  It can be easily done.  Options, futures, cash contracts, can be combined and sell say 115% of 5 year average. So if your right about the price, even if you fall short, that isn't going to hurt you.  And if your short because of weather, then you have your stop points in to scale back sales!

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elcheapo
Veteran Advisor

Re: Let's Talk Farm Markets

Egads....60,000 plant population on
Dryland....

How many inches of rain do you need.

How much is the seed

Talk about rolling the dice
You MUST have high yeilds
Double seed cost, double fertility cost
And double the chance for no rain,
no crop.

For some reason it does not surprise me
that is the way a floor trader would do
Things

Maybe all of us need to quit.
We don't know how to market or
How to raise 300 bu corn.
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