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Palouser
Senior Advisor

Low ag prices historically?

Feb. 28 (Bloomberg) -- Jim Rogers, chairman of Rogers
Holdings, made the following comments in a Bloomberg Television
interview from Hong Kong today.

On agriculture:
    “It’s a huge bull market in agriculture. Agriculture
prices are still extremely depressed on a historical basis. The
price of sugar has gone up 600 percent. It’s still 50 percent
below its all-time high. The scope for price increases in
agriculture is staggering.”

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9 Replies
jec22
Veteran Advisor

Re: Low ag prices historically?

I was just thinking that soybeans seem a little undervalued today...but nothing like Jim is talking about.  The northern regions of Brazil are still getting hammered with rain.  How does wet, wet, wet and 85 degrees mix with mature beans?  At least when we have a wet harvest it is generally cool.

This is not the 80's, what we are going to go thru is uncharted waters.  The weather patterns are staying extreme...what happens if  the corn yield comes in at 140?  Unthinkable.  Around here there is a huge amount of presold grain.

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JRfrom OR
Frequent Contributor

Re: Low ag prices historically?

Jim Rogers is one that gets it.  I was playing around with some inrflation adjusted crop prices last summer, and came up with the conclusion that at that point in time we were quite possibly at a historical low for some crops, perhaps for the history of mankind.

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jrsiajdranch
Veteran Advisor

Re: Low ag prices historically?

PAl/ Yea but the dollar has nothing to do with it right? Smiley Very HappyThe only way to believe that the ag sector is at all time lows is to have a value to judge it against. and in terms of dollars we are not at all time lows. In terms of  gold yes, in terms of 1903 dollars absolutly!

 

Here is an interesting chart. for Iowa farm products.

IF you really want scary the wieghted average of the 40 years of history is that milk is just a shade under 5 times the value of a bu. of corn. That means that milk should be about 35/cwt RIGHT now.  Scarry!

 

IF that link doesn't work try this.

http://www2.econ.iastate.edu/outreach/agriculture/periodicals/chartbook/Chartbook2/Tables/Table3.pdf

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Palouser
Senior Advisor

Re: Low ag prices historically?

The only meaningful standard is on a CPI adjusted scale, whichm larely eliminates the issue of the $$$. Commodites were on a long slide coming into the new millenium. Most crops gross income had declned @ 50% an acre. The Dittrich bros from the ACGA did a lot of very sensational mapping of ag in real terms at that time.

 

If your product maintained value in real terms you'd have no problem with current grain prices.

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nwobcw
Advisor

Re: Low ag prices historically?

   Does that take into account the increases in yields?   60 bpa beans at !3 bucks is a whole different thing than 25 bpa at 4 bucks.

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k-289
Senior Advisor

Re: Low ag prices historically?

Where was this guy when we were "awash in wheat" just a few months back ?

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Palouser
Senior Advisor

Re: Low ag prices historically?

I would guess it refers to the price/bu. If you're feeding then it's a very relevant figure.

 

I used to keep up on a series of tables that definitely showed a downward trend in real prices for grains. One would have to use a trendline for yields to get more local or personal revenue and margin by acre in real terms. Or plug a price from given years into the government CPI calculator to get a general idea of today's value.

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GoredHusker
Senior Contributor

Re: Low ag prices historically?

Prices and advances in technology have to be taken into account.  For example, I bought a new pickup in 1976.  It cost roughly $5500.  It was just a two wheel drive single cab pickup.  In 1992, I bought another pickup set up like the 76'.  It cost roughly $17,000.  The cost over the 16 years more than tripled.  Today, I just quoted a 2011 set up like the previous two.  It will cost roughly $27,000.  It's been nearly two decades since my last purchase, yet the price didn't even double.  As prices get higher over time for things, the rate at which they double or triple in price slows down. 

 

Prices for everything also seem to eventually lose relationships.  An older friend of mine bought a quarter of farmground decades ago.  It cost him 30 hereford cows.  Today, 30 hereford cows won't even buy six acres of farmground.  Ten years ago even when corn was at two bucks a bushel, I could buy roughly three gallons of farm diesel.  Today with corn prices at $6.50, I can buy roughly two gallons of farm diesel.  A decade ago, nitrogen fertilizer cost roughly 100 bucks a ton.  Today, it's more than quadrupled while corn price hasn't.  Nine years ago, wheat hit near five bucks while corn hit near three bucks.  Today, wheat prices haven't even doubled while corn prices have well more than doubled.  A lot of it has to do with how high one was at to begin with.  It's a lot easier to double or triple a price when you start at two than it is when you start at five.  To put it in perspective, I can make a lot more money with $3.00+ farm diesel today even though it's five times it's value of ten years ago than I was making with 60 cents diesel ten years ago despite corn not being worth five times what it was then.   

 

 

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Artifice
Senior Contributor

Re: Low ag prices historically?

jimn rogers was bullish oats in 1988.

he is alwamys bullish commodities, right for 4 yrs wrong for 20 ruight again.

 

opines are a dime a dozeni

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