cancel
Showing results for 
Search instead for 
Did you mean: 
giolucas
Veteran Advisor

Re: Obviously lows are in grains.

Rayfcom,
How old are you? Just curious. Smiley Happy
0 Kudos
rayfcom
Senior Contributor

Re: Obviously lows are in grains.

50's

0 Kudos
rayfcom
Senior Contributor

Re: Can you afford to plant $2 corn "straight"?

I'm no expert on agricultural technology, so I have little idea about what can or cannot be invented to lessen the costs of growing corn. But from what i have seen in my lifetime, I have learned that its an expensive lesson to think that the unimaginable cannot happen. I bought my first personal computer in the '90's at a cost of about $3,000, and today just 20 years later I can buy a machine that works 8 times faster for one third of that cost. The first calculators I remember from the '70's were something like $40 and performed four basic math functions. Today you can get a calculator that does many many times the number of functions for what, $5 or less ? I never imagined in 1982 with the Dow Jones Industrial Average at 750 that it ever would trade at 26,000. I have seen crude oil soar to over $145 a barrel, only to be followed by a crash to below $30 a barrel, all the while everyone in the world needed crude oil to heat their homes, run their cars, and provide the plastics they use in everyday life.

 

Now granted, perhaps for the foreseeable future there is a price level below which growing corn is not sustainable. But in an economic panic when the consumer demand plunges to subsistence levels, its any port in a storm regarding selling consumer products, even foodstuffs. And who knows what kind of machinery or seeds can be developed to lessen the cost of growing and harvesting, reduce the need for labor, or allow plants to grow with less water and soil nutrients ? And who knows how many new corn acres will come online around the world that will cause everyone to take losses against the input costs they endured to grow their crop ?

 

I have seen it time and again that no one realizes how low a price can go until they face the prospect of no bid. Then any price is a good price to sell. Doesn't happen often and perhaps doesn't last for long, but that is no comfort when cash flow is needed and prices are dropping and margin calls are coming in to support under-water positions for adequately watered plants.

 

So I have found its a good idea to never say never and let the marketplace decide where prices are going. And right now the price action of corn for the last few years tells me that its well within reason to expect the multi-year downtrend in corn prices to continue until either global demand for the grain increases significantly or the supply of the grain is reduced.

0 Kudos
BA Deere
Honored Advisor

Re: Can you afford to plant $2 corn "straight"?

Technology has rendered soil as "something to hold a plant up" .  There`s "nitrogen fixing corn" coming online, corn already seems to require less water to produce a bushel.  Genetic engineering may one day make stalks able to produce 6 ears making 1,000 bushel per acre common as 200, so we`d need 1/5th the land.  Probably weather control too where rain could follow a bent jet stream dumping rain where it`s needed and shutting it off where it isn`t.

 

But if doing it our "old fashioned way" has us over producing ….there just isn`t a new "ethanol" use for corn that`s going to take us to a new price plateau, that I see anyway.  If corn was $7 and stable, there`d be monetary reward for creating 1,000 bu per acre corn seed.  Then you add in that electric cars will get us away from oil powered cars, thus reducing further the need for corn ethanol. 

 

But there could be a black swan, a blight on corn that dramatically cuts the yield for years that bails us out....it always happens to "other countries" right?   Other than that, we`ll just have to wait around for Superman to rescue us.

0 Kudos
rayfcom
Senior Contributor

Re: Can you afford to plant $2 corn "straight"?

I have no doubt that there will be events over time forward that will cause the price of corn higher for maybe even extended periods of time. Weather seems to be cyclical, and no one has figured out a way to outlaw droughts from the playbook of Mother Nature. Also, technology takes a long time to come to fruition, especially revolutionary technology that changes the entire dynamic of an age old process such as growing corn. 

 

So its not like the corn market is doom to all those who make their livings in it. The point is that right now we are in a down-trending market that has brought prices steadily downhill since the $8.43 of August 10, 2012, a day that will live fondly forever in the minds of every corn farmer. Along the way we have touched down as low as $3.01 on August 31 of 2016, and bounced back up above $4.00. This kind of ebb and flow price activity will no doubt continue going forward, albeit at progressively lower ranges. And we may even reverse the downtrend for at least a short time depending on variables occurring that are not expected. 

 

The only point I have been trying to make was that the contributor who suggested last week that its obvious that a bottom has found to the most recent decline in corn prices probably is mistaken at worst, and premature with his/her optimism at best. And from a longer term perspective, in a market where the foreseeable trend remains towards lower prices, profitability in corn farming will depend not on absolute price levels but rather on embracing methods of farming that will maintain profit margins even as prices decline. My suggestion is that technology will become more important than ever in corn farming in order to meet this profit margin objective, and that those who refuse to embrace new technologies in their farming practices likely will not be able to maintain the profit margins necessary for them to enjoy their present standards of living and perhaps to see their corn farming businesses survive. 

0 Kudos