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Nigel
Veteran Contributor

Re: The Market Psychology Roller Coaster

An old economic concept is that when prices are high producers will maximize production...this is the psychology.  Last season saw corn and Soybeans at extremely high prices so based upon this theory  (pending any slight interruption in the weather) that forward production would be at an all time high this season, which has proven correct.  As such demand does not met supply and prices fall back towards an equilibrium level at some point.  If I had a prediction I would think farmers would curtail some production in 2015 in order to get a boost in prices...just my thinking, but I am not a farmer.  

 

Worldwide-Corn Production.png

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Jim Meade / Iowa City
Senior Advisor

Re: The Market Psychology Roller Coaster

As a group, on the national scale,  farmers may curtail some production of certian product and add production of others..  With some reservations, farmers will grow what makes them the most money.  A farmer with the choice to grow corn, soybeans, wheat, cotton and milo will move his acres around to some extent to optimize his return and minimize his input cost.  Some farmers may let land lay fallow for  a year but probably not much more.  Changing to a different enterprise, such as quitting corn and adding hogs is an expensive and time consuming process.

Regionally, farmers may differently.

The farmer who raises corn and soybeans well but has little or no market for wheat, cotton or mil, willl grow even more corn and soybeans.  What else can he do?  He will try to minimize inputs and maximize returns within his limited range of flexibility.

No farmer is going to voluntarily reduce production to increase prices, because the neighbor will have the incentive to increase porduciton to take advantage of the better pricies caused by lower supply.  The farmer who reduced producion hurts himself first and worst.

Among the adjustments that will be made are waterways may be tighted up, headlands eliminated and so forth to bring more land into produciton unless they are covered by government payments.  Fertilizer and herbicides may be skimped on and that may reduce production, though the farmer hopes not.

 

 

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Nigel
Veteran Contributor

Re: The Market Psychology Roller Coaster

Is there ever a situation where Farmers would collude similar to OPEC in order keep production and prices at a certain level?   

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Jim Meade / Iowa City
Senior Advisor

Re: The Market Psychology Roller Coaster

For farmers in general, try a search on the National Farmers Organization NFO.  You might also try Grange.  

For ag people who are not commodity farmers, search on market manipulation in the beef market 2004.  For higher up the food chain, check out lysine price fixing and ADM.  You can even go with the Hunt Brothers and soybeans.

 

For normal farmers?  Nothing that I know of.

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Hobbyfarmer
Honored Advisor

Re: The Market Psychology Roller Coaster

Three classes of people that can't be organized

A) fishermen

B) farmers

C) the criminally insane
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elcheapo
Veteran Advisor

Re: The Market Psychology Roller Coaster

I'm getting motion sickness .......

And no I'm not pregnant.
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timetippingpt
Honored Advisor

Re: The Market Psychology Roller Coaster

To answer Jeff's question, most of grain ag is still in the Denial phase, just read this website.

Animal ag is in the euphoria section. Selling land is probably a good idea for some, today not tomorrow.

 

Not surprisingly, the element of TIME is completely ignored in the above graph. It takes a certain amount of time for human psychology to run its course. Technology might shorten this time, or modify it slightly, but it still takes a certain amount of time for a human to give in to new reality. jme

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sw363535
Honored Advisor

Re: The Market Psychology Roller Coaster

my mentor once said, "Don't forget your job is production.  Everything else is a hobby.  Marketing might trim your profit margin or give you a little spending money, but as long as you spend less than comes in, the only way you can go out of business is to stop producing.

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