Marketing: We're just getting started on the interesting stuff

[Palouser]

IN fact, this year may be more interesting than 07-08, if for no other reason than it probably won't be as terrifyingly riveting.

Back when I decided that the Russian drought was going to be a big deal I also mentioned that it was going to be more acute than most people realized because of the feed that was going to be lost for their growing meat industry (heavily protected and promoted by the government - they are not going to sacrifice their meat industry like they did after the empire collapsed). Globally the attention was on the loss of wheat exports, which also is a big feed component in Russia. OK, fast forward, and I realize that I didn't really go back and finsh that line of thinking - and my own harvesting, fall work and marketing took center stage. Then I received some info that pointed out the Russian feed situation, rumors of Russia looking for exports, and China talking with Argentina. Bingo!

Think about something we haven't seen before - Russia and China as competitors for feed from S America, and the outlook uncertain for S American production. Add to that, tight ending feed grain stocks in N America. I'm certain that West Coast grain export facilities are pretty well maxxed out, meaning there is demand. After a percipitous drop this year, consider that coarse grain consumption in Russia maybe nearly 1/3 of what it was in the early 90's. It is possible that Russia MUST go abroad for feed in a big way, because feeding TOO MUCH wheat in rations is said to result in less weight gain/production and more problems. NOW maybe I understand why China is negotiating with Argentina for corn supplies.

This IS conjecture, but there are too many signals not to pay attention. Keep in mind that a moderate crop next year in Russia would mean no more feed imports to Russia, even if they didn't get back to their large grain exports immediately.

[p-oed Farmer]

I agree wholeheartedly with you palouser....... The traditional end user is waiting for some unforeseen event that will save his bacon......(No pun intended hog guys......:~)..... and drive these prices down....... They are IMHO......... Letting the Russian and Chinese very quietly scarf up any excess world feed grains and I think that the US end users will have to fight it out for the floor sweepings...... It is sad that the US end user has gotten so poor at risk management that there idea of protecting themselves is going out 30 or maybe even 60 days of use and that is it....... It will be very hard on a lot of good people but that is what I am seeing today...... It is not that I am so bulled up that I feel this way...... It is just that I do not see ANY rationing at the current levels and we are burning thru to much to have any left at the end of the year at the current pace...... p-oed

[jrsiajdranch]

PO-ED on the enduser thingy........  Most fo the endusers are so strapped cash wise that they can't get out there more than 60 days.  Also if you were to use a hedge stratagy most banks want you to use some sorta fence and that requires cash for margin calls.  More exposure for sure.  So before you go knockin on the enduser for being hand to mouth realize that may be all the cash that enduser has. 

I am going to say that this is primarily in the livestock sector.

The overseas buyer isn't getting further out as the dollar keeps up it's girations they are gambling that their currency will be stronger in comparison to theirs.  So they are gambling that they will be able to buy cheaper on the currency spread. 

just my thoughts probably worth less than yours! JR

[p-oed Farmer]

jr....... This is the part that I do not understand for sure...... Grain farmers can sell to the elevators sometimes two- three years out...... All that we have to do is commit bu that are to be delivered at some point in the future...... Now we get no $$$$ up front and do not have to put any $$$$ up to hedge this futures position...... All we hear is that the elevators are getting creamed when we have this wild type of markets with margin calls......

Now we have end users like you that really need to control your cost and you seem to be required to buy the actual grain with $$$$....... It would only make sense to me that the elevators would off set there short with the grain farmers with the long that the end user requires....... This would take take the risk away from the elevator with margin calls and help the end user with his risk management........ You would only have to pay for the grain when you buy it just as the farmer only get his grain when he delivers it........What am I missing here?...... p-oed

[booked]

Makes good sense to me cut out the CME as a middle man, one big problem it would be an off exchange trade and the governmant man would not like it. The CME would also sic there lawers on you if government man did not. I could be totally wrong I usually am............

[jrsiajdranch]

Booked if we get rid of the CME what would Mike do?  We can't have him loose just roaming the streets! LOL

Oh yea we ned to keep Al busy too,  He's got a webinar coming up you know. 

However we could do with a few less of the Market guru's.

[jrsiajdranch]

P-OED that would require more regulation as graiin guys would and should want all those buyers bonded which would require more gov. employees to regulate and enforce.

Also in all truthfullness it is easier to deliver a grain contract out three years. Quality is easily determined and corn is just corn.

But if you talk about contracting milk out three years that would be really hard for the enduser to offset price risk to the consumer so it is very hard for us to go out and hedge that production.  Also yield and grade stuff in the meats could be very hard to meet sometimes putting the producer at greater risk. 

But if you want to go to your local livestok guy and offer to contract with them you sure can. I would have done it back in June so I could have locked up my corn needs at 3$ a bushl but I couldn't find any takers.  JR

[Palouser]

The reports I'm getting indicate near panic in New South Wales, which was just recently scheduled for a record crop. Some areas in the SE are facing emergency situations from the rain with the forecast looking grim.

There are some worries that the rain is bad enough that some areas might not get harvested at all, but this remains to be checked out. One picture shows a 9380 (400hp) pulling a large grain wagon, with another tractor pushing, stuck in water and mud, augering wheat on the ground to get it light enough to get it out. In the foreground there are deep tracks filled with water with ripples from the wind.

The amount of milling wheat available to be exported is shrinking rapidly and it is forecast that Australia will have record amounts of feed wheat. There are some other possible problems with contracts that might encourage farmers to deliver low quality wheat to help saitisfy commitments.