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Honored Advisor

Lower markets and actual "available" production

Not the usda potential  production..................


High prices were not profitable for large areas of the midwest.  But they were survival.  When dry land break even yields were absent for the last 4 years, high price meant survival..  

If you take the national production over the last few years, high prices were a direct reflection of production(and monetary policy and china trading US dollars for more stable commodities, etc).  So Price does not raise profit across the board.  It only moderates loss... If you, as an individual, were able to produce in normal patterns over the last 4 years, you were not normal,  if you were normal the prices would not have gone up.  

I, to often, make the immediate mistake of saying prices have come down on rumors of better production. ----- a half truth......


Prices come down for several reasons other than increased production one being "Lower prices create lower prices and higher production, which brings lower prices...


One thing we never document --- not us or the usda --- is production that is available to the market.  When Prices are high producers tend to keep some grain.... off the market........ for at least one tax season.  Especially producers who are motivated by tax policy.  Producers who are not motivated by tax policy are few.... it's a survival thing for those who are not guaranteed a big crop every year...


And of course, as it has this fall, in lower price years, there are decreases in bushels held off the market.  The policy that limits immediate profits also limits immediate losses with higher sales....  And the market has been confirming this activity since mid summer...


The best news we will see in the market may come in soybeans which may turn upwards with the gradual release of Argentine "savings accounts"..... if so it will be signaling the end of the harvest dumping of US beans....


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Senior Advisor

Re: Lower markets and actual "available" production


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Veteran Advisor

Re: Lower markets and actual "available" production



Of course there are many reasons why prices come down, one being that there is cheaper competition.  Not saying better, just cheaper.  So lets say that all the farmers in the US hold on to their production, then what?  Prices Rise? Is it not that simple, I do not think so.  Why are we in this environment? China comes to mind.  


I think we can build a case for a simple economics example that has to do with the issue of Scarcity.  We do not have one right now.



BTW.  Hope you and the family is well.

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Honored Advisor

Re: Lower markets and actual "available" production

Gio/L we are doing well.


Our strength is our ability to produce, as it is for many in farming.  So we have the additional bushels to fund the reduction in price.  And we carried financial strength over into this "limited price" year to provide financial strength.


Our local elevator has written more checks this fall than any year before.  The activity of the markets the last three months is at least in part due to the cashing in bushels to meet expenses.  And it is taking 30-40% more bushels than it did 18+ months ago.


I have expected beans to gain strength through harvest.  For a lot of reasons.  Harvest was late and many of the acres were stressed and low on production.  I saw beans still unharvested this week with green leaves and very immature.  They won't get harvested now.....

The argentine issue will unfold very slowly and uneventfully because Argentina is not carrying over a strong "cash" position.. The tax fight will be ongoing as it has been for decades..  As usual there is a little truth in this story, like most market news.. Irregardless, if leadership is changed and policies change, realities will be faced and politics will face the same limited choices.


For soybeans,,, the US crop is in and more "sold" than usual.  SA acres are locked in, and bushels will be sold more rapidly than normal --- because they face a cheaper per bushel price as well.  Sooooooo, the acre fight between corn and beans becomes interesting.  I have already heard comments of corn acres down and bean acres up....... The picture is more dynamic than that.  

I am one who thinks that lower commodity prices across the board could lower acres in both...



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