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Veteran Advisor

What are traders thinking ?

Well, the question was asked what were in
The minds of farmers, and knowing what
is good for the goose is good for the gander,
lets see what the other side of the fence
Has to say. I've been told "one or two" read
The comments here, so don't be shy, let's
Hear your thoughts.
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19 Replies
Veteran Advisor

Re: What are traders thinking ?

I know I will get slammed either way but I am not like  the typical trader and trade like Farmers do:"Every once in awhile".  It is easier to be right once or twice a month then every single day.   I try to look for opportune time to jump in and jump in with both feet forward.  I see the Soybean market with some support and would like to see this thing get into the $10.50 range.  Strikes, weather and demand have to be aligned for this thing to pop.   I know there is a lot of bearish stuff out there that can easily take us to the lower $9.00's.     

 

In respect to the USDA report, we as traders do not create our own evidence to bring to court.  We just trade it. 

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Honored Advisor

Re: What are traders thinking ?

You might want to be careful using the USDA's numbers for evidence.... Smiley Wink

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Honored Advisor

Re: What are traders thinking ?

Well before geo posted I was going to say they still suspect there is 58¢ in loose change in the bottom of a few farmers pockets, and they are going to make a run at it.

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Senior Advisor

Re: What are traders thinking ?

If I'm going to give money to a stranger I usually have to be presented with a bill I recognize as mine.

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Veteran Contributor

Re: What are traders thinking ?

I am staying away from Agricultural commodities at the moment as I have done well the past few weeks buying homebuilders (due to low interest rates) and airlines (due to low oil prices).  I look to this site for some inspiration but...I see more people complaining about low corn, soy and wheat prices and not offering any solutions to the low prices.  WHAT I WANT to hear is how farmers are going to run a more cost effective business due to the lower prices.  Where are you going to save money...plant less, cut back on fertilizer, etc.,.  

 

In a perfectly competitive business the winners are the ones that have a competitive advantage, either economies of scale or otherwise.  At the moment I will remain on the sidelines.  

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Senior Advisor

Re: What are traders thinking ?

Well, those with 'economies of scale' are going broke and the fertilizer cartels aren't going to cooperate.

 

Not plant??? You don't know ag economics, clearly. Farmers ALWAYS plant, always have and always will. The one bright spot is fuel, but that's only one that's clearly present.

 

We aren't in a 'perfectly competitive' business, never have been, never will be. If that's your approach you should stick with Flinchbaugh, the NFGA or the 'old' Cargill that used to try and tell us farmers what we should and shouldn't do - like drive the price down and capture the 'market' by driving everyone else out of business (Indian farmers will drink insecticide or jump down a well if you press them hard enought). One flaw in that reasoning - if they have a handful of seed they're back in the business and nothing has been accomplished.

 

Stick with airlines and builders. They never operate at a loss not knowing what's coming next.

Highlighted
Veteran Contributor

Re: What are traders thinking ?

@Palouser...clearly that is the type of answer I expected from someone who doesn't have a solution..bash me for what you claim I don't know..but didn't put forth an answer that you clearly know what your talking about.  By the way for a definition of perfectly competitive market I copied and pasted one here...enjoy your weekend!  

 

Perfectly competitive markets exhibit the following characteristics:

  1. There is perfect knowledge, with no information failure or time lags.  Knowledge is freely available to all participants, which means that risk-taking is minimal and the role of theentrepreneur is limited.

  2. There are no barriers to entry into or exit out of the market.

  3. Firms produce homogeneous, identical, units of output that are not branded.

  4. Each unit of input, such as units of labour, are also homogeneous.

  5. No single firm can influence the market price, or market conditions. The single firm is said to be a price taker, taking its price from the whole industry.

  6. There are a very large numbers of firms in the market.

  7. There is no need for government regulation, except to make markets more competitive.

  8. There are assumed to be no externalities, that is no external costs or benefits.

  9. Firms can only make normal profits in the long run, but they can make abnormal profits in the short run.

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Senior Contributor

Re: What are traders thinking ?

Nigel,
One huge unknown in the farming business that makes it unique is the weather.
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Senior Advisor

Re: What are traders thinking ?

Nigel, if you are looking for a 'solution' then you don't understand ag economies. You are looking for 'math'. It's not personal Nigel but you reveal your lack of understanding with such an academic expectation so far from the reality of being a producer. One has to account for the reality and see how well the theory fits, not the other way around. Ag has to be the farthest from a perfect market that exists.

 

In ag economics, at the production level of grains, math can tell you there is a problem but, it doesn't necessarily provide a solution. That's the point. There are too many factors outside the control of any given farmer.

 

Risk taking 'minimal' ??? Not on the farm! A farmer doesn't even know what his production is going to be and doesn't know what the price will be when the product comes in. But, in almost every normal case the farmer plants every available acre knowing that more of something will always be better than less of something in the end, all things being equal. It's always been and always will be.

 

Yes, one can switch to a far different crop that is very likely to be a niche market with higher risk and unknown access and costs for converting. Again, not a 'solution' but a high risk experiment.

 

Yes, I use math to help lay out a representation of any given factor in the market I think might be important but that doesn't necessarily give me the opportunity to counter a number that is going against me. Just tells me where I am.

 

 

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