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jrsiajdranch
Veteran Advisor

Question on demand destruction

OK guys from reading this board it sounds like we may have a 2/3 crop or worse. ( No I do not believe that just sayin some of you guys got it buried already) So here is my question.

 

 

WHO WONT GET THE CORN?

 

Somebody isn't gonna get enough corn to feed the animals,ethonal, or export mkt.

 

SO who isn't gonna be able to afford the feed and more importantly which sector has the quickest ability to come back from a shut down?

 

More dairy cows were slaughtered last month than anybody thought, and we didn't even have high priced grains that we do now.  SO I think they continue to liquidate.

 

E plants already are shuting down maybe several more are slowed. THe export mkt. has been lack luster but with our dollar still realativly cheap I don;t think it is price that is reducing purchases.

 

SO your question for the day. If you could choose one industry to slow down which would it be?  SOme body is gonna have to be rationed. thw question is how long till they come back?

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18 Replies
Slim123
Senior Contributor

Re: Question on demand destruction

Jr: I don't think the farmer has a lot to say in this. It will survival of the fittest in the affected industries. Some of those ethanol plants that closed were small, inefficient and built in the middle places where they don't have the most competitive advange. It seems the dairy industries has a buy-out every few years with the remaining dairies expanding more then what was cut.  

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jrsiajdranch
Veteran Advisor

Re: Question on demand destruction

Can't disagree dairy is a very socialist part of ag. HOwever you assertion that we have a buy out every few years is overblown. 

BUt the bigs do get bigger. 

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Canuck_2
Senior Contributor

Re: Question on demand destruction

Since you gave me all the power to make the decision and carry out the job I would shut down ethanol IF it is required.

Seems it is easier to shut down an ethanol plant and restart it than to gut a livestock industry and then rebuild the numbers when the feed is available again.

Export is the same but maybe export should have to prove that any corn going there is for food for man or beast and not for ethanol.

 

If the corn supply is short then something has to be reduced and the system we have uses price to determine what gets reduced. Don't think that system will change quickly and so we will probably reduce consumption in the livestock industry as well as other areas to ration the supply.

Livestock with a good land base will not suffer like those who purchase all their feed.

BACK TO THE FUTURE?

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jec22
Veteran Advisor

Re: Question on demand destruction

The answer is amazingly simple.  Do nothing.  Let high prices cure high prices. 

 

BUT, we are not even close to high prices.  Last year cash corn was a buck over this year.  Beans have been at this level several times in the last few years. Heck, we had cash corn higher than yesterday's price several times this year, and that was way before there was any drought in the picture. 

 

These are still normal prices.  Ray says that he is seeing a lot of corn coming, both old and new.  Hardly any crisis out there then.

 

Put on your big boy pants and breathe folks.  If I remember right, no business model out there says you never lose money, it happens, if you can't handle one year with a loss, you were in trouble anyway.  That applies to both farmers and endusers.

 

I worry more that the government will think they have to add another disaster program to help farmers out.  CRAZY, waste of taxpayer's money.  We have crop insurance.  Nothing more needed for the grain crop farmer.   Just like the student loan interest discussion.  Where is the common sense?  If they do nothing it doubles, so they are going to freeze it again, no doubt.  Why couldn't they just meet somewhere in the middle?

 

This is a very serious weather pattern.   The 'on your knees praying for the wisdom of God for all' is the best plan.  Makes you realize that I would have never been tough enough to settle the wild west.  Man, those men and women put us to shame.

 

End of rant,  better take my meds now Smiley Happy

 

 

 

 

 

 

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BA Deere
Honored Advisor

Re: Question on demand destruction

This is the problem that we have when the USDA tries to be clever and pull a fast one to tweak grain prices lower in an election year.  It would`ve worked like a charm if ol` Mother Nature had cooperated, if you want to make God laugh, make plans.  The way farming was set 30 years ago (farmer=500 acres, 80 sows, 40 cows and grain).  He could ultimately make the call on who got the 200 acres of the corn that he would market.  ie,  in a short crop year he could say "I`m not liquidating my livestock even if I`m feeding high priced corn, I`ll tough it out and on market overrun corn if I have any".   The way things are setup now (not ideal) the market will decide, say oil/gasoline goes up and ethanol can pay for corn but the pork industry can`t.  Well then piggy sows will go to market and in a few months consumers will have to decide how much they value their bacon for breakfast.  But the ethanol is becoming more of a "by product" of their feed industry so ethanol isn`t a totally dependent on fuel and if it disappears tomorrow you can add a buck to the price of gas which take away the consumer`s steak buyin` money.

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roarintiger1
Honored Advisor

Re: Question on demand destruction

jec22,    Great post........There are several posters on the site that gets IT.......whatever IT is....Smiley Wink   And you are one of them.  

This looks to be a year when the survival of the fittest (as far as an end user goes) will rule.....Those who come out on the other side will continue to do business and be ready for the next wave of good times.  No different than the farmers who scraped their way thru the 80s & 90s.    

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Nebrfarmr
Veteran Advisor

Re: Question on demand destruction

Tough question.  My first thought was the Ethanol plants would be the first to quit using corn, but around here, people are stretching their hay by using corn stalks ground up and mixed with DDGs.  If the ethanol plants shut down, they will have to use that much more corn, to blend with the stalks, to get cattle to eat them, or cut some corn acres for silage.  There isn't enough hay out here anyway, to get the cows through anymore.  High priced corn got a lot of hay ground tore up, with the idea of using stalks & DDGs to replace it.  Without the DDGs, they more or less have no other choice but to feed more grain, or sell cows.

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Jim Meade / Iowa City
Senior Advisor

Re: Question on demand destruction

My first impression is this is a silly question.  But, this is an election year and it is an important one because of the global economic problems.  So, maybe it matters because everything is going to be political.  A couple of observations (I don't pretent they are accurate, just my impression).

1.  Ethanol is going to be a political debate topic this fall.  Plenty of people want it unsupported.  We may hear "food or fuel".

2.  I was struck by how ethanol plants tried ot weasel out of contracts or get back money they paid for high priced grain.  That soured me on contracting to ethanol plants.

3.  China will buy what it needs - what does it need?

4.   Livestock will feed what it can afford.  With this drought, restocking may stay low.  Dairy may go.

5;.  Grain processing innovation will stay slow.  Who wants to build a corn plastics plant like in Blair, NE when corn is expensive?

 

My impression is we farmers don't have much influence on where our production goes.  Most of us grain farmers have to sell and we try to sell high.  That's about as far as my vision extneds.   

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Palouser
Senior Advisor

Re: Question on demand destruction

I'm more or less with you Jim. It is what it is. It's politiccal if one wants to make it political. Otherwise it's going to happen anyway, anyhow. Everyone affected will make adjustments - as has always been the case. Many who get hurt will blame someone else, and some will take the political angle to vent frustration. Changes absolutely nothing and there;'s plenty of fuel for anyone's fire they want to keep stoked. The additional idea that there is/was a way to predict us out of whatever happens is really the longest pipe dream.

 

It is what it is. Look at the cycles of any industry, whether animals or ethanol - and the recovery from the worst will take about that long or a bit longer. Life will go on. Some will suffer just because it was their turn by fate. Some will lose or gain on the other business considerations because that's what they are set up to do.

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