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03-11-2019 11:07 AM
Market thoughts from one of my Chicago sources, requesting anonymity. His thoughts:
"The market did not respond to the Chinese purchases as they had been telegraphed by the trade teams prior to execution. The government purchases of 10 mt with another 10mt promised. I think they are working on the 2nd tranche now with 1.5 mt reported since last Thursday.
That would put Chinese buying up to 20 mmt for the year from the US.. but is down from the 28 million tons we originally thought the commercial trade would take. While the Chinese government recently raised their forecast for imports to 85 mt up from 83.. that is still down as much as 17 million from what the trade was contemplating they would take before the trade war started. Selling soybeans for their government reserve could be friendly if the trade war was resolved and the 25% duty went away... but after releasing some of their stocks from reserve the trade wonders if new US sales only detracts from Brazil exports, and we are left with burdened world supplies.
We note that Argentina is competitive with US for meal and oil.. Brazil basis has been coming down.. and is competitive for beans and soy oil, meal getting closer.
The US corn farmer also getting front run by cheap feed wheat as well as Argentine corn offers that have been par to discount with US.. 2nd crop corn in Brazil is progressing well so far.
US corn exports have been disappointing relative to the high expectations the USDA had imposed. It had sort of stuffed the balance sheet with export demand.. the ethanol numbers have been disappointing also.. as we had lost Chinese ethanol exports.. so that was a write down in demand on the last report.
Now the trade will have to think about US corn potential and planting.. too early but upper mid-west could be slow. That can be a drag on yields. But, two week outlook for Ohio valley and the Delta looks better, drier, and warmer."
Now, what say you?
03-11-2019 12:43 PM
Well if folks would plant bout 10% to hay or pasture that would diversify income and make the crops like corn beans wheat higher priced due to less of those grown.
course Uncle will likely bail the lazy or stupid on purpose operators anyway.
03-11-2019 12:57 PM
Just to point out the obvious, the news is always, and must always, be the most bearish at the bottom.
"What I say" you ask, well simply put, this guys news is already in the market. And, if that is as
bearish as hed can get (corn carryout of 1.7Bil) given those ridiculously biased opinions, well I'll just
keep buying more calls and selling more puts.
03-12-2019 10:02 AM
That is a nice thought...
It has always been the reality that is sobering when you walk in the FSA door. Like a "this is what your labor is worth in our eyes"
It is the issue that is driving acres to cotton in such large numbers in the southern half of the plains. With trade at 74 cents a pound and loan at 65 cents. That idea that you can get paid for a large % of you production after harvest and not have to wait until the gin gets a round "toit". It facilitates marketing and extends opportunity.
On the corn side it is just depressing, especially if ya don't qualify for food stamps.
03-12-2019 06:19 PM - edited 03-12-2019 06:23 PM
Logically, a higher recourse loan rate should have a short-term positive price impact, depending on expected participation. Also, logically, it might only be a short-term effect, since inventory is still inventory, and that inventory will eventually weigh on the market.
Similarly, a short-term loan immediately and positively impacts available funds in working capital, yet assuming that short-term loan needs to be repaid, then at that time those available funds are used.
It becomes a permanent, or at least longer term impact if you do not repay the loan (don't think that's legal), refinance it to longer terms (frowned upon), future production shortfalls offset the negative price impact of the deferred liquidation of the inventories, or future demand increases to offset the deferred liquidations, other factors being equal.
Then also, you have the issue of collateral values -- if you borrow $x per bushel against grain that is only worth $x per bushel, then there is no margin for the lender (CCC) to cover potential or probable losses due to fraud, misappropriation of funds, unpaid accrued interest and collection costs, grain spoilage, etc. So, again logically, what is the difference if you can only borrow against 50% of your grain at $x, versus borrowing against 100% of your grain at one-half of $x ?