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Blacksandfarmer
Veteran Advisor

Re: Prepare for $2.75 Corn

Looking at the export sales this week, it tells me that corn is priced right for buying, not for selling. Im thinking the low in the corn market was made just prior to the last report. Their is no risk premium in this market whatsoever at this time, so why forward sell now? Right now beans are on a nice run, but its only due to high export demand. SA has to have a near perfect growing season for the soybean market to bottom out in the next 3 months. It could happen, but history should tell us that there will be bumps in the road for the SA crop before harvest= forward selling opportunities in soybeans. If SA has an average crop, bean prices wont look as attractive, but for the fringe acres in this country, soybeans wheat and sorghum may start looking good compared to the low margins in corn. The corn market may have to work to get over 91 million acres next year= forward selling opportunity. $2.75 corn next year is possible, but only possible with a bumper crop out of SA and the US. It makes me wonder what prices this guys got his customers locked into? If he got customers to lock prices in when no risk premium exist, he could have many angry customers buying back there forward sales. Just my two cents.

 

I haven't made any forward sales yet, but do have targets. I did lock in fertilizer recently though.

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ECIN
Senior Advisor

Re: Prepare for $2.75 Corn

Dam -- all this doom and gloom ! I cant fight it any more - Thanks to YOU guys on here -  I cantt believe I'm posting this up - But YOU doomers have won - Smiley Sad

 

This from Mr. Boehje out of Purdue ;

 

Enjoy the read - i have to get out of here - Wonder if Andy is on TV someplace ?

 

With lagging income, some beginning farmers may run into trouble meeting debt-service ratios

"I am not a pessimist," Michael Boehlje, a professor of agriculture at Purdue University, told an audience of farmers and bankers huddled at this week’s Federal Reserve Bank of Chicago conference. "I am bullish about farming in the long term. But I am also very concerned about the next three to four years."
 
Boehlje painted a picture of a cyclical industry on the verge of a downturn. Noting that the last four agriculture booms have been followed by two busts and a soft landing, he predicted that this time around the industry could be heading for a soft landing. "We’ll have a [25%] decline in income then a small recovery," he projected, adding that he thinks corn prices will fall below $4 this year.
 
"I am not concerned about debt–to-asset ratios. But I am worried about repayment capacity," he said, adding that some farmers, particularly beginners, may also have trouble meeting debt service ratios. Given the working-capital challenge, Boehlje told the bankers in attendance not to insist that farmers put more capital into their land.
 
"I am worried about bumps in the road," he said, adding that an ag downturn may have started this year had it not been for the influence of weather and crop insurance payments. "I don't want farmers to become roadkill."
 
Full-on agricultural busts, he said, typically result from collapsing demand, particularly for exports, which account for about 25% of U.S. ag income. Though economic growth in China and India may continue to fall in coming years, the decline won’t be enough to cause a market collapse. Similarly, demand for corn to produce ethanol may fall in coming years but not by enough to crater producers.
 
Farmers can expect interest rates to rise steadily for the remainder of the decade -- a 200 to 300 basis point increase over the next six years, according to Federal Reserve Board projections -- which will hurt the capital-intensive industry. "That’s a pretty large percentage increase when you consider that rates are three or four percent," said Boehlje.
 
But the bigger challenge may come from agricultural expansion throughout the world during the most recent up-cycle. "We’ve added an additional 147 million acres under the plow in the last 8 years," said the economist, adding that land that goes into agricultural production rarely comes out. "We’ve got to figure out how to absorb it."
 
In the meantime, Boehlje expects agricultural land values to fall by 15% over three years. The price-to-earnings ratio on farmland, which is traditionally in the 20% neighborhood, has climbed to more than 30%. "I’m going to be frank with you—that scares the hell out of me."
 
"We need to move into pause mode. We need to take up a big collection and tell every realtor to go on vacation for a year....We’ve got to get this market to go into pause mode."
 
Equipment dealers are even more vulnerable to a downturn, said Boehlje. Inventory of used equipment continues to build at many farm equipment dealerships, even as manufacturers move new models through the pipeline. It isn’t clear whether existing tax incentives for buying farm equipment will be continued into 2014.
 
"We lost 25% of our retail machinery dealers in the 1980s crash," he said, noting that some survived only by shipping excess equipment to South America. "Bankers should put them on their watch list. The common denominator was too much used equipment.

 

 

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hardnox604008
Advisor

Re: Prepare for $2.75 Corn

Basically we all work for the government.

 

Policies work for a while but they always carry within them the seeds of their own destruction.

 

Then it takes a while to decide there's a problem and you get a new policy to address that.

 

The only thing to worry about is when there comes a time that there is a decidedly anti-government-sponsored-agriculture political consensus.

 

Note that I say an anti- consensus because for the lack of that the default option is same 'ol.

 

The old regional commodity block politics and the overrepresentation of commodity ag states in the Senate is still pretty powerful even if the number of people directly involved in agriculture has become quite small.

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sw363535
Honored Advisor

Re: Prepare for $2.75 Corn

Sounds like the final push to shear the sheep in the harvest market.

 

If they believe their own predictions why only 10-15% in 2015.  Get er sold.  Now  ------------- Your  not making money now so let's extend that good fortune into 2015---- Smiley Happy

 

If they really believed and cared for their producers.  They would be saying don't plant  so much corn next year.  

 

 

kraft-t
Senior Advisor

Re: Prepare for $2.75 Corn

What is it about this doom and gloom that makes this debt retiring old phart feel smug? Perhaps it is the lessons learned during the 1980's that brought us to where we are today.

 

Remember that brilliant quote I made to Mr. RWS.... The same "brilliant" guys that bought quality $1000 farm land in the 1980's did not sell it for $12k per acre in 2012.  The moral is that if you are exceedingly proud of yourself, just wait awhile and you might get an attitude adjustment.

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rawhide
Advisor

Re: Prepare for $2.75 Corn

here is my opinionFWIW-1)we have had 4 GREAT years- 2) everybody's bins are full- 3) if corn goes to 2.75 DON'T PLANT THE FIRST GRAIN OF SEED! - 5) buy DEC corn and set back and watch.  i know NOBODY will do this but it's a thought 

 

 

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BF2012
Advisor

So, Let me get this straight.

We have a worldwide glut of corn that is so big and of course the 2014-15 crop is already big and in the bin and it is worth $ 2.75?  Doesn't it seem a little strange that it isn't already $ 2.75...I mean, if that's all it's worth, why isn't it there already?   I see no reason on earth corn should be $ 4.00 at this point in time.    What am I missing here?

 

And, if we get to $ 2.75 corn, shouldn't that translate into $ 50.00/unit seed corn $ 200.00 potash and $ 350 DAP.  

kyu2852570
Veteran Contributor

Re: Prepare for $2.75 Corn

So hobby I get a sense of arrogance from you that you have made so much more money than any other farmer the last 7 years and you were so much smarter than the average farmer with what you did with it and now you cant wait to watch all these idiot farmers drop like flies and you are gonna be sitting back laughing, whats the bible verse for this kind of wishing everyone fails but yourself?
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farsider
Senior Contributor

Re: Prepare for $2.75 Corn

Arrogance? ok I guess if you believe that someone doesn't expect the good times to keep on rolling and prepares for a downturn as arrogant then throw me in that group too.
Proverbs 21:20
The wise man saves for the future but the foolish man spends whatever he gets.

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Hobbyfarmer
Honored Advisor

Re: Prepare for $2.75 Corn

You you need to get your senses adjusted