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

[p-oed Farmer]

jr..... Please explain as to what you mean?....... I do not understand as to why it would have to be regulated any more than it is today....... The elevator would offer you a contract that would name the time and place that you would pick up the grain just as they do now...... But now they mostly only deal with the basis...... They are letting you handle the futures risk...... They could reduce there margin exposure if they were to have you as there long as it relates to grain...... Hedging your milk is another issue that I can not address...... My guess is that the milk is not liquid enough to go out very far..... All I am saying is that last summer when Dec corn was at $3.45 a person could have bought corn on the board just as we (grain farmers) try to sell at the high end of the yearly range......

Grain farmers have had to sell there crops for years at times that the market offered a return...... Almost always at harvest time the market was in the tank...... For the foreseeable future to me...... The risk is on the end user not the producer as it has been for the last 30 years or so...... For end users this is a new ball game and I feel that needs to recognized as it will be very difficult as we move forward...... p-oed

[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 satisfy commitments.

[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 satisfy commitments.

[Jim Meade / Iowa City]

Would you care to comment on this Ohio State report on FSU?

http://ohioagmanager.osu.edu/wp-content/uploads/2010/12/October-2010-FSU-Newsletter-Zulauf-and-Ayers...

U/Ill wrote one of their summaries of it:

http://www.farmgate.illinois.edu/archive/2010/12/why_should_a_co.html

What do you think of their comments on the livestock industry and feed needs?

[stewartbundrick]

Pal, is this feed grade wheat surplus that is developing causing loss of support for corn??

[Palouser]

Your sources are very good summaries of what I've been aware of, but are much better quantified than my impressions.

Some years ago there were internal reports that at some point in the future, assuming Russia rebuilt it's meat production back to historic level prior to the empire collapsing, little grain would be available to be exported. The graphs on the different meat types seem to show that poultry and pork are gaining, perhaps because confinement is easier to invest in. The beef industry is definitely struggling so one might assume they are having problems with the logistics of the cow calf and feeding segments. I do know that there were reports of calves and cows being sluaghtered in the countryside when the drought became pronounced. I'm going to guess that investment in large herds is problematical. Maybe they haven't built the modern slaughter houses yet in enough locations needed to support increases in beef.

I have long said that production variability is the issue with FSU grain exports. It has been rare to have 3 years of back to back good yields. If it isn't drought it is the harsh winters and layers of ice, or uncovered wheat during a time of cold temps. My understanding is that 10% winter kill is the norm.

[jrsiajdranch]

P-OED thanks For the questions. 

First the regulations.I was being kinda tongue n'cheek.  IF you start selling to a large livestock industry wouldn't you want them to be bonded some how so as to ensure that they could pay you for your grain?  ALso the livestock producer would want some teeth in the contract to ensure delivery, right?  So both groups would need to have some kind of ability of access to those tools that elevators currently have. Which would require more Gov. employees to help with enforcement.

Your statement concerning the elevators says that they are willing to lock up the price to you of bushels that haven't been sold to them but are anticippated to be purchased at a later date.  Thereby probably increasing their exposure.  I don't see them willing to do that.

And your Last statement is one I have been harping on for two years now!  The livestock industry in it's current consolidated format was built on cheap grain.  The idea that you can buy it cheaper than you can grow it is over.  Now you can grow it (especially with manure to offset fertilizer prices) cheaper than you can buy it.  This is going to change the dynamics of the custom cattle, and hog feeder.  It has also had a very negative effect on dairy farms as they have built in areas better suited to milk production but poorly suited to handle grain production.  This will cause significant changes in the livestock industry that will swing advantages back to those who have an adequate land base and it may infact play a role in accelerating the land price increase as livestock producers scurry to lock in a feed supply.

Also storing livestock products is impossible without determing their value.  Corn can be stored very easily and then used to meet it's most economicallly advatagous use.  Once you harvest the milk it must be stored in a product which will determine it's value.  An example is that once you take milk in it's fluid form and process it into cheese you can not process it back into fluid milk to capture the highest value price it will always be cheese. and it will always be a certain type of cheese.  Same goes for cattle while steaks may be the most high value product once you harvest the steer you must make a determination as to how to use that carcass therby setting the value of the meat.  If steak is in a glut the day the animal is harvested you can not store it till steak needs to be replenished you must make a determination and put it into hamburger which is of lower value.  Therby lowering your economic value and any attempts to gain from storage.

Lastly the change probably will mean a continued widening of the basis as the risk management tools will be more expensive with the incresed volatility.  May you live in exciting times!

[Palouser]

When it comes to rations I'm over my head. But the Pacific Rim has long imported feed wheat for hogs and poultry. But my understanding is that wheat is insufficient unless mixed with other sources of protein that aren't as 'hot' - whatever that means.

Feed wheat will undoubtely replace a fraction of corn or soy, but the degree is unclear to me, and I suspect small and it will be temporary. The end user has a decision to make when importing. Maybe in some cases it's just logistically easier to start with soy or corn and supplementing might be partly a matter of logistics of keeping seperate storage, mixing, timing imports, etc. Next year feed wheat might be very scarce. Corn and soy will always be there - one assumes.

The other issue is how tight global corn and soy stocks will be. Wheat might just be the ticket if S America doesn't have a good crop. Another month and we'll know a lot more about that situation. I have seen a ship n Vancouver with a partial hold of wild oats for hog feed destined for China (some years ago), so, if it is cheap enough rations will be improvised. I can assure you that Aussie feeding of wheat will be important.

[rightone]

On things like health of the economy....Refer to the emerging market stocks, the BRIC stocks, cos in the Smallcap / Midcap etc..

Those smaller cos with some international markets have larger earnings due to the decent global earnings / sales etc..

On the Midcap/Smallcap...20% average ups so far in those stocks for 010.

The DOW is a follower now...not a leader....6% up, though better than a down is NOTHING to write home about.

Granted the DOW should now move in the 15% up range for 011....as said afore, it just FOLLOWS the small, more international type folks along now.

I feel the emerging / bric / midcap smallcap indicators are THEE big protien market indicator also.

Don't matter if it's beans, meats, cheese etc...any protien concentrated agri product now follows the emerging market economies.

Interesting thing is it's not a "point ti point" correlation.

Always a time lag and some of the agri protien products will not show the 20 to 40% Ups those stocks show.

 ( some of the agri products will be up 50 to 200% in 011 due to the indicators mentioned ).  

[nwobcw]

Your right p-oed. When I buy corn from the elevator they bill me that day  to be paid upon receipt not next month like seed fertilizer, etc.  Plus they charge me storage from that day forth.