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Honored Advisor

Well, I`m panicked

I`m `Panic at the Disco`  panicked, this is ridiculous!  2"-6" more on the way, flood warnings til Thursday.   Corn sprouting on the tips of ears and the elevator man expects mold on the way, I suppose that same damned black mold we had back in 2009.   The longer range forecasts are wet, you don`t just get 5" of rain on saturated ground and then take advantage of a "4 day cloudy window" ...we need some serious drying out.

 

They talked about "oh is Iowa gonna be 65 or 70 bushel bean yield?"   How about ZERO for some farmers?   I`m not trying to "talk the market up" no I want the market down for October, so we get the maximum insurance checks, because the odds of that are getting greater and greater.

 

The stalk quality is crap that`s holding up the sprouting ears, but let`s forget about the corn, we have much bigger problems with the beans.   On the other site "Oh I rarely combine beans drier than 15%.  I combine up to 24% when it`s hard to get them to flow out of the tank...just put `em in a bag  Har Har Har" .   Around here, I don`t think the elevators take beans over 17,18% if they do, you`re giving them away with the docks.

 

Last year I was at a small local elevator BSing with the manager and he got a call from a guy in northern Minnesota that needed to get rid of 20,000bushel of 18% beans.  The manager said "I can`t do anything with that many wet beans!" .   So, these stories of wet beans...I don`t know, occasionally someone must believe those stories of "aw, no problem, but a little air and 120 heat and you`ll be fine"  or "put `em in a bag!"  Well who knows maybe we will have to learn those tricks if there`s anything to them.  

 

But we very well could cut Iowa`s bean yield in half before this is all said and done.   

 

https://www.youtube.com/watch?v=IPXIgEAGe4U

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6 Replies
Veteran Advisor

Re: Well, I`m panicked

And do you really think that will impact price ?

And will the impact in price offset the lost
Income ??

((Spoiler alert..no))

..
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Senior Contributor

Re: Well, I`m panicked

What you are reporting may be true for your farm and maybe the locale where your farm is situated. 

 

But here's the problem I have with extrapolating your results to the overall market.

 

November Soybeans bottomed on September 18 at $8.1225. and right now trade at $8.70. That's an increase in price of 7.1%.

 

December Corn bottomed on September 18 at $3.425. and right now trade at $3.67. That's an increase in price of 7.2%.

 

The bottoms both occurred several weeks before the heavy rains started falling a week or so ago.

 

If your thesis about 15% of the soybean crop being too damaged for delivery were correct across the entire US soybean world, and that the soybeans are more damaged than the corn crop, then two things absolutely should have happened :

 

1) Soybean prices should have risen at least 15% to compensate for the reduction in the crop;

 

and 2) Soybean prices should have risen much more than corn prices once the rains started damaging crops.

 

So at best we can say that your results are not being observed in most of the soybean and corn farms across the plains and Midwest. At worst we can say that you are trying to use this forum to give a price boost to the crops you are about to bring to market. 

 

Either way, the market does not find your experience to be consistent with the overall soybean and corn situation as it presently exists. 

 

Price for any commodity or financial instrument is the aggregate equilibrium of supply and demand forces based on all of the known information at any given time. That is the definition of Price in markets based on the law of Capital Asset Pricing Models. Your information is part of that body of data that all combines to determine what buyer and seller will agree upon as the value of a transaction. This is why the market is always correct at any given moment, because its price determination is based on the aggregate of thousands of data points all being considered by the multitude of market participants. Its also why its a very costly endeavor to think that anecdotal stories (even if confirmed) have any significance to the whole picture. The performance of a few stalks of corn in your field does not determine the overall performance of the entire cornfield. But the market price is the result of evaluating all of the stalks of corn in everyone's farm, and crystallizing all that data down to one understandable reading that defines the overall supply and demand function of the market. 

 

So I am sorry your crops may not be all that you wanted them to be this year. But because of what is lost, you should be especially more concerned about that which is not lost, because those good crops may be able to compensate you for the other losses. Which is why at least in corn, to risk a probable 30 cent and maybe even an 80 cent loss from present price levels for at most a 35 cent potential gain is a risk that you especially should not contemplate considering you already are starting off this marketing season with a nasty loss of income from the damaged crops you claim to have,

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Honored Advisor

Re: Well, I`m panicked

I could be wrong, wouldn`t be the first time, but I am in the camp that we`ve seen our lows in corn and beans...not saying "$5 & $12" or anything like that.   But 2 reasons, I thinki the trade has discounted how much the poor conditions of N Iowa,S Minnesota, Missouri (dry) Michigan (wet) have effected the national yields and now this fight to get harvested???   

 

Stalk quality is poor and wet conditions will keep even the garden spot areas out of the field a week or 2, there will be ears on the ground and lodged beans.  The weather forecasts are going to have to be wrong at some point or millions of acres of beans will be lost.   5" of rain and then foggy drizzle and then you get to November, short days and cloudy and then "8" of snow on November 10th and winter sets in and you can forget about the bean crop for many farmers.  Occasionally I have seen this setup and the forecast does turn out wrong and you do get your window and get the beans by the skin of your teeth and vow never to plant beans again or group 1.4`s.   Not saying that we`re screwed, but let me put it this way, if we`re screwed, this would be the way that it would start. 

 

Secondly, I think a deal with China will be reached and it will be after the election, but it will involve more bean sales to China. and as John Roach quickly answers "$1" would be the amount of soybean rally on positive China news.  

 

Not saying I`ll be one of the lucky one`s to capitalize on it, but I see better prices a head and the fact it is so easy for gurus to be bears and most people are proven wrong in the markets that if I did have a bear position, I wouldn`t sleep at all well.

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Senior Contributor

Re: Well, I`m panicked

I have no argument with the prognosis for beans, in fact I am thinking that a great spread trade just might be buying beans and selling corn. From everything I have heard and read, the bean crop is damaged to the point that somewhere between 15 and 30% of what's in the ground will not make it to market. Corn is in far better shape. I do not discount the high yield readings of over 180 bushels per acre average nationwide, because almost every survey taken by private researchers has agreed or exceeded the USDA's most recent report. 

 

Even if the China tariff argument gets settled to some degree in November, it will have no bearing on the trade for the rest of this year. Which is why I am thinking to buy Nov or Jan beans against Dec corn sales. 

 

I assure you that in the corn market its not easy to be bearish after such a huge drop in price from the highs back in 2012. We are only 70 cents off the lows for the last nine years, ordinarily a place to buy rather than sell. But the fundamental and technical evidence says otherwise. The final low for the down move that started in 2012 is going to occur with a $2 handle on it, not a $3. It will occur just as or just after the global economy enters the long overdue recession from the economic recovery that has been underway since 2010. Agricultural commodities make their lows when the overall economy is entering a period of weakness, not when its firing on all cylinders. 

 

I have spent more time than I should have delineating all the evidence that is saying corn prices have not yet found their ultimate bottom, which is a necessary prerequisite for a substantive long term rally to begin in prices. These factors are both fundamental and technical, and very pervasive. The corn market had the chance earlier this year to reverse the six year bear market, but failed at $4.1225 instead of taking out $4.395, which is the critical level now required to turn the long term bear into a long term bull. I would love to get bullish on corn because there seemingly will be a lot more upside potential than downside. But a number of factors will have to change before that can happen, most importantly a break in the three year trend of incredibly large corn yields coming to market. 

 

On top of all that, the difference in method between large and small farmer continues to exert downward forces on the price of corn. Small farmers will have to figure out some way of reducing their costs of production down to the levels that the big farm companies have done. I offered some suggestions on that and was roundly booed by the same people who are getting killed on costs, so I am not going there again. But when the huge farm conglomerates can get their costs of production down to the low $2 or less area, which they can in some part through having the luxury of capital and in some other part having the intelligence to employ a smart hedging program for their production, they inevitably have more incentive to sell in the $3-$4 range than the farmer whose cost of production is above $3.

 

As long as the small farmer refuses to adapt to the techniques of the large farmer to the degree possible, the large farmer will continue to gobble up failed farms and keep the price pressure on so as to force more farmland to the market. That will eventually raise prices once the large farms control enough farm land that they can dictate prices because they have the financial and storage resources to hold supply off market. But until then, prices will be under constant pressure because progressively more and more farm production is being accomplished at progressively lower costs, and is thus being sold for profit even with a $3 handle.

 

Fighting the trend is a dangerously lethal exercise in commodity markets. The trend is your friend, and the trend remains bearish for the long run. Get production down, get prices over $4.1225 in the lead futures contract, get Open Interest to start rising again, and then we can talk about a secular bull market in corn. Until then, sell into every bounce, or get used to progressively lower prices for your products.

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Honored Advisor

Re: Well, I`m panicked

If I had a dime for everyone that I`ve encountered that thought they had the markets figured out......I`d have a lot of dimes!  Smiley Happy    There ain`t a horse that`s never been rode nor a cowboy that`s never been throwed.  

 

As I understand it, the markets look ahead, the smart one`s skate to where the puck is going to be, not to where it has been.   I see no more or less reasons that the next 50 cent move in corn won`t be up as opposed to being down.   I`ve seen and you have too, the markets inexplicably rallys "for no reason" and it goes higher, longer than even Sue Martin in her mini skirt predicted.  

 

JMO, if a deal is struck on say November 20th with China, it could be limit up days ...but on that news it might should be sold  ...something about "buy the rumor, sell the fact"  The anticipation of more trade might bring irrational exuberance to the market, being as we`ve been beaten down for so long.

 

The biggest mistake that a small farmer could do is think he`s going to operate like a Bigshot to survive.   He doesn`t have the volume in what he buys or sells.

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Senior Contributor

Re: Well, I`m panicked

I can tell you from experience that there are a lot of traders and advisers in every market I have ever seen that have profitable track records based on the system they use to predict price movements. Profitable hedging strategies exist and are accessible, I have made a career employing several of them in three different markets. Just because a person cannot do something does not mean that no one can. Usually the best and brightest wind up in hedge funds, and retire young. Until you've taken the time to research the matter by engaging with advisers who can show their consistent performance, its wrong to think they don't exist. The market gives a lot of clues to where its going, but to see what those clues are saying requires a lot of time and effort, Which is why I advocate the use of outside advisers with proven hedging strategies become part of every farmer's team. 

 

No trader nor adviser can be nor needs to be correct on every trade, But if they consistently make money year in and year out, they are valuable to their clients. I have written about this in many threads here during the last month. 

 

In markets where the traded product is deliverable, the forward looking pricing mechanism of the nearby contracts is limited. Example : we know from something called the J-Curve that a trend change in the dollar's value on currency markets will cause a change in the US trade deficit witht he country of the opposite currency, but the lag time is about 18 months for a variety of reasons, Changes in tariffs can affect markets sooner, but its not an instant turnaround. As a producer, are you going to pay the cost of storage for your corn while you wait for orders to come in from China if there's a trade deal in November after the election, or are you going to sell you 2018 corn in December's delivery, knowing that the trade deal will benefit you in 2019. Of course you will sell into the December delivery, because it will not be affected by a November trade deal. 

 

With that in mind, even if there is a trade deal with China in November, the December contract should not be affected. What probably happens is that 2019 contracts rise in price, while the December stays where it is or even falls to a level where storage costs are fully paid for by the 2019 contract prices. In fact, you have given me a very good trade idea, sell the Dec and buy a strip of 2019s. Its a bit of a lottery ticket, but worth the bet, I for one did not think tariffs would affect the price of corn all that much, if anything it would have a slightly positive affect. Chinese still have to eat, they'll just buy the corn from a middle man country who will buy it from you and pump up the price to the Chinese. In the end, you still have the same supply and demand, the only difference is the Chinese consumer pays more.

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