The bearish marketplace

[roarintiger1]

This has been the norm for a long time now.   Is there anyone out there that sees the sun on the horizon or the light at the end of the tunnel or the glass being half full?  Or........should we just call the auctioneer and line up the machinery?   I would like to know........My goal is to not be the last one to have a farm sale.   

[BF2012]

and it's a locomotive running at full throttle.    Brace for impact.    As for lining the machinery up....you're about 12 months too late on that count as well.   Just saying.   Be sure and deduct 50% off of your net worth statement in that department when you see your local banker.   He'll be happy to add your stuff to their pile of other worthless shiit they have financed for a debt drunk society.

Happy New Year.

[sw363535]

Economic reality....................

When CME and the commodity markets were basically the US trade facilitator, economic factors would eventually affect supply.  When farmers are loosing money on grains, farms cut sales and fed livestock is one example of how price influenced production economicly.

Most all of the production going through CME was free market oriented....

NOW,  with CME participation being world wide trade of world wide supply, does the % of acres in the world that are planted under governmental control change economic reality.  For instance wheat:  a large portion of the wheat acres planted are under control of government agencies, China, Russia, Ukraine all come to mind.  Won't those acres be planted regardless of economic factors?  Many of the worlds ag. crop acres are planted for supply regardless of a price.  If that is 50 % of the worlds acres, how much does that dull the relationship between economics and price discovery..?

In US history we have  governmentally interfered with this process a lot and found we had to support price or establish a price bottom to keep supplies available...  But In the WTO world and the CME gone reality, who is going to care about price supports...

Is this a foolish thought or is this something to worry about??  Wonder if Russia will sell us some wheat when it is $2 a bushel?

[BF2012]

There will be plenty of guys trying to unload $ 2.00 wheat including the commercials sitting on millions of bushels of inventory from 2013-  14 and 15.   and 16.   

[BA Deere]

Roarin`, not only is the glass only "half full", but the glass is half broken and probably never will get full again  😞    There`s maybe a couple rays of hope, 1. is a drought or similar production trubles if only there was something to that global warming hoax...dog gone it    2. due to the threat of a global depression, Janet Yellan may have to cut loose "helicopter money" and we`d see a return of the index funds that are fearful of inflation and always long commodities...God I miss those.   But that`s the only chances I can see is basically a "Weimar Republic" type money printing and they`d have to come with a wheelbarrow of money to buy a bushel of corn and we could pay our debts off with cheaper dollars.

All the commodities are in the tank, here`s what they`re saying about steel.

http://www.msn.com/en-us/money/markets/world-steel-chief-calls-chinese-glut-serious-and-critical/ar-...

[hardnox]

Not trying to be a smartass but anyone who has a cost of production well above current levels and doesn't see a realistic way to cut it probably should give it some consideration (not that anyone ever does).

The good news is, as per BA's post in Business, for ECB producers who took a ding on production this year the supplemntal payments will be hitting the account in about 11 months, so that helps. Flipped from west to east this year, for the most part.

World stocks of grains are currently adequate. There will be production problems somewhere in the world going forward but it is impossible to say when. Another year of build will be painful and place that much more cushion against future problems.

BA, I don't thing Fed mandate permits "helicopter money.'  they can go to negative interest rates (practical limit is a fractional negative unless they ban cash), more QE. But the limits of both ZIRP and QE have been fully revealed. they can push asset prices a bit higher but the mode of transmission to the broader economy is weak.

In order to reflate it wil take a political consensus between congress and the executive and maybe even the SCOTUS if someone chooses to challnge. The odds of that happening before a full deflationary flush are nil.

[hardnox]

A modest correction.

The Fed could theoretically buy in private securities, as opposed to governments, and thus push a lot of liquidity into the economy. Although given the current hysteria directed toward that isntitution and the fact that it is desperately trying to maintain cred, I think it is a little like the broader government- unlikely to act until a deflationary spiral is well entrenched.

And even if they do I imagine you'd see another, briefer, round of speculative frenzy followed by the slow realization that it isn't being transmitted into much in the way of economic activity.

The only real solution, if there is one, lies in the political realm and I'll lower my odds on that from nil to zippo. At least until the rubble stops shifting.

Given my view on that, sure, I'm in favor of radical action- probably a huge spending blitz on infrastructure with an emphasis on green energy. If you really believe the apaches are close on your trail then you'll consider jumping off a cliff.

Think of it as a Farm Program for all of America.

[hardnox]

PSS.

The political consensus doesn't change until people who had a lot previously are suddenly happy if they just have half of what they thought they had.

[bruce MN]

Or....http://www.theautomaticearth.com/2015/12/2016-is-an-easy-year-to-predict/

[hardnox]

Yeah, I saw that and was going to post it over at the zoo.

My take has long been that the Obama neoliberal can kicking exercise has presented a gift from heaven to stage a strategic retreat from a government sponsored ag bubble and maybe keep a fair portion of the windfall.

Although there is a very real risk in that a) I could be wrong and b) in recent times the government has made it clear that if you don't keep pedal to metal you'll get left behind because if things get a wee bit tough they'll devise a bailout.

In maybe 5 years hindsight will be 20/20. And, the time to act proactively is probably past.