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10-02-2017 09:44 AM
A little something from Van Trump...
"Two years ago we exited a four-year period of higher prices that was brought on by a series of crop problems and a strong jump in world demand. The U.S., Russia, Europe, Australia, and South America all suffered one or more crop disasters between 2010 and 2014. At the same time, the utilization of renewable fuels swept the globe. In addition, the improved dietary preferences of the Asian middle class were being met by animals that were being fed a much more protein-rich compound feed. World corn consumption grew by 22% from 2010-11 to 2016-17, and soybean use grew by a stunning 34%
The production response was equally impressive. Through a combination of acreage and yield increases the world’s farmers managed to not only meet that demand explosion but to also build record world carryouts in corn, wheat, and soybeans. This month’s combined world carryout for those three commodities was 579 million metric tons (MMT), up 58% from four years ago. All of that while weathering a half-dozen major crop disasters.
So where do we go from here? In a word, “lower.” We find ourselves wondering what demand can do for an encore. We feel that the rapid expansion of renewable fuels is behind us. Blend rates are peaking, new markets are not being found and environmental science has become very conflicted as to the net benefits of renewables. Likewise, rapid dietary advances and protein introductions in Asia are slowing. We see continued demand growth, but not at the 2011 – 2017 rate. The one ray of hope will be if China does follow through and implement a national ethanol mandate in 2020.
Conversely, production advances show no signs of abating. Sophisticated farmers continue to find ways to improve plant populations, as well as the timing and application of fertilizers, insecticides and other chemicals. However, the most notable advances appear to have come in seed technology. Soybean pod weights in particular, have stair-stepped higher with each new generation of seed. Key areas of Iowa and Illinois were very dry this year, but farmers are reporting yields that are their second or third best ever. Twenty years ago these weather conditions would have resulted in yields that were half of what we’re now seeing.
Overseas, Brazil and Russia remain the headliners. Brazil has been making public and private investments in its ports for more than 30 years, and the past five years have brought a very rapid expansion in the north and northeast. Now attention is focused on the interior infrastructure to bring supplies to those export elevators. Even at today’s lower prices, new land is brought into production every year. A new acre in Brazil is almost equivalent to two acres anywhere else, as farmers plant full season soybeans and safrinha corn almost every year.
Russia, to some extent, is following the Brazil model: first prioritizing their ports and then following up with their interior infrastructure. The Russian Agricultural Minister just announced that their 2017 grains production was 127 MMT, a new record. The previous record was set in 1978 when yields were barely half of this year’s, so their potential for expansion is huge. While added acres in Brazil are always new acres, added acres in Russia are often old acres returning to production.
Like may inside the trade, we believe that a large reduction in U.S. acres is on the horizon. The USDA’s baseline budget shows a reduction of five million acres in the eight major crops. We believe that estimate is understated. Assuming the correct reduction is closer to ten million acres, what price structure will it take to idle that much land in the U.S.? With production costs already coming down for next spring and new crop futures at $4 for corn, $4.90 for wheat and nearly $10 soybeans, we feel that price drops of 15% will be needed. It will be a financially difficult time in rural America and land prices will suffer.
As a closing note, we want to mention that major changes underway in China may create a trading opportunity. China has taken several steps to reduce their massive corn stocks. They have eliminated the price support program for corn and they have auctioned off more than 36 MMT of government corn stocks. Despite that, their domestic prices have moved steadily higher for the past seven months. They are also rapidly expanding their corn processing capacity with 21 MMT of capacity under
construction. If they do go to a national E10 mandate they will need to add more than twice that much capacity. In addition, some provinces are paying a financial incentive to get producers to switch from corn to soybeans. If all of those programs come together they will need to be a major importer of corn and domestic DDG will be substituted for soybean meal in feed rations. Under that scenario the ratio of soybean prices to corn prices will need to adjust for the rest of the world. The nearby futures ratio, currently above 2.7:1, has rarely traded below 2.6:1 this year. In the China scenario described above, that ratio will struggle to reach 2.5:1 and could return to 2.3:1."
10-02-2017 10:00 AM
Is wrong and what must be done.
Consider the person's qualifications to speak and
How their speech is colored by their means
And this "expert" says we need even lower
Prices ? What is the objective ? To wringe
Out the last Penney of the farmers, while they
Make money every day,..even as the market
He has a nice write up, but we are becoming
So dumb we don't realize it's a smoke screen.
10-02-2017 11:29 AM
further this "expert"........goes on about the price and demand and etc...............
i hate to burst your bubble, but we are "on fire" selling soybeans.......doesn't the trader read their own reports ?
just a few short weeks ago........we had the 8th largest soybean sale IN HISTORY..........
if you look at the data, approx 24 to 25% of the corn crop is exported........that means......since he is a expert, you
have to explain......that approx 75% is being used at home.....i think we are doing a fairly good job of getting rid of
product..........yet............we've got to cut more, we've got to go lower..........why, where, how much, to what goal ??
yet, if you look at the world numbers, we holler (or the trade excuse me), that there is plenty of grain in the world.......
look at the numbers, a vast bulk of that is in china.............you take china's supply, then run it aginst world
numbers remaining........we have went to surplus, to a somewhat tight supply........but thats right, the experts dont
read that, we just have to keep telling the stupid farmers that they MUST ACCEPT these lower prices, and MUST ACCEPT
these silly basis...and MUST ACCEPT the high cost of inputs...and MUST ACCEPT lower incomes or no incomes, yet
produce more an more, so we can trade more and export more.
I'm sick of the lies
10-02-2017 12:04 PM
10-02-2017 04:36 PM
No one likes to hear bad news, however one needs to hear it and act accordingly, sooner rather than later and if it turns out the belt tightening wasn`t needed, well Merry Christmas! Hindsight 20/20 a guy shoulda had a farm sale in 2013 and bought the Dow index at 16,000, but how do you know? It`s all spilled milk at this point and with taxes and debts and such, it`s hard if not impossible to unwind an operation on a dime in a year or 2 without "substantial penalties", we got the tiger by the tail and if we let go, one of us dies.
It probably does mean very tough times for sub-200 bushel land, the farming of it and selling of it and maybe the renting out of it. There may be some land that the rent couldn`t be cut low enough that it could be profitably row cropped. Inputs have to come down, these 3 years of promises of "oh next year seed`ll be cheaper, oh next year fertilizer`ll be cheaper". Well Lucy has pulled that football away from us for 3 years now and this will have to be the year where the buck finally stops, if we`re too spineless, perhaps it`ll be the bankers doing it for us.
But yeah, we`re price takers, when there`s a 1 million bushel bunker sitting there with `15 and `16 corn as we`re dumping and storing 2017 corn...yeah, it`s a "buyer`s market".
10-02-2017 08:04 PM
just who is it to this expert is correct ? I can take 5 market people, and each will say something different.....
do we know how this person is positioned in the market ? you know, part of his income is to write these
and the name alone, makes my eyebrows go up like mr. spocks.
as I said, have you looked at exports, and have you looked where most of the stocks are ?
other countries will need to buy.
BA i'm surprised at you, giving up so easy and rolling over and dying. I thought you had more spunk
behind you !!
I'll have to say we don't have any two year old bunkers around here..........everyone out there, hold up your mouse
if you have one in your neighborhood.
plus, if it has been in a bunker for that long, will not be good for much anyway, doubt if will be competing for
a spot for export.
I too am down in the dumps over this........I suspect even more than many on here......but something I've noted,
it's always darkest before the dawn........with big yields year after year after year, prices going down down down,
the needs to be a "bottom", certainly all of this neg news has been "factored in"......plus if you look at the
market indicators, "it's time for a rally".........but, then again, difficult to get a harvest rally.
is it going to be enough of a rally so we can afford a new Lincoln contential pickup.......no......but maybe enough
to upgrade the diet from bologna and pork and beans, to hamburger helper with hamburger
10-02-2017 10:37 PM
Cheapo, tell me how calling the USDA "liars" and saying the "trade doesn`t get it" will put bread on our tables? It hasn`t worked all that well the last 3 or 4 years, someone`s gonna have to give up. Land has a price tag on it, there`s an annual cost associated with it regardless how much it produces, to some it`s a $300 annual rental payment and to other`s it`s a $20 annual property tax payment and all the different costs in between. Obviously the farmer with only a $20 annual tax payment will be last man standing, everything else being equal.
The $20/acre tax cost guy isn`t necessarily the smartest if his objective was to die with the biggest pile of money...that would be the guy that sold out in 2013 and bought the Dow index and who knows selling the Dow index and he buys gold tomorrow morning? ...who knows? But for the $20 property tax guy to keep going will have to burn equity, but if he enjoys farming more than stacking money, then he is the smart one.
But to be married to the past, thinking "if it wasn`t for those darn USDA and traders and their dog, we`d have $5 corn"....that bird has flown. Yeah, if some other country has bad luck and we pop to $5, I`ll be happy (schadenfreude) but that is what it will take and probably be short lived.
But to survive this, you need to be a low cost producer. I`ve raised hogs for over 35 years and see the changes in that industry, I remember a hog magazine in the 80`s with the headlines "Can you survive on 34 cent hogs?" the sub title was "Your competition does". I see parallels, oh I blamed (still do) the politicians and bigshots but it didn`t do me any good. The industry changed and high cost producers were knocked out and some low cost producers even, but no high cost producers remain ie, no one has deep enough pockets to raise 60 cent breakeven hogs anymore. I even (foolishly) voted for Democrats once or twice and they couldn`t save the small producers.
If Van Trump is saying to expect grain prices to go down further and land prices to be negatively effected, I think it`s prudent to figure out how we`re gonna take that hill, not complain about the enemy fire. JMO