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Senior Advisor

Where we are now

In this market situation I recognize the usual opinions - maybe including mine - but, I think the idea of 'calling the market' is WAY overdone and an information killer. The usuals are sure this market is about to implode and the other usuals are tending towards ' I told you!'  ANYTHING can happen - except recovery of permanent crop damage. And the usuals are saying how high prices due to crop conditions will kill us all and cause permanent demand destruction. I don't believe it for a second, though some will be hurt, no doubt, as usual. Looking back tells us that 2007-8 was recovered from fairly well and farmers are better off than any sector of the economy except maybe oil. And crop insurance is a protection almost impossible to replicate in terms of wide spread cushions for income.

 

No one could call this drought. But, anyone should have had this as part of a dry trend that could come back and bite HARD! It has and there can't be a bit of surprise. It can bite much harder in the near future. Anyone who has trouble accepting this isn't being realistic. It's not a given, but the cards are being stacked and they are falling. If you are going to take a definite market action based on an expected outcome then be prepared absorb the loss. But that is the case with any insurance and at some point it's justified, and more so if there are financial liabilities that could hamper a  farm operation.

 

My advice is don't rely on old sayings that indicate something like, "you can tell it's reaching a top when ......".  We have a LONG ways to go. But significant portions of the crop are at risk. In 2007-8 it was wheat carrying the market and the peak was after the first of the year - partly because the 'market' (and i largely mean futures) could not accept and weigh the trends. The market is much more sensitized since then but, I still regard it as a lagging indicator.

 

Meanwhile, this is an opportunists playground. This is where the producer can be glancing at the ace in the hole and be thankful for his patience.  

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14 Replies
Senior Advisor

Re: Where we are now

Corn is  $9.10/56lb bu Portland, OR. Wheat is almst $1 less.

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Honored Advisor

Re: Where we are now

Pal,

 

We have 15 protein wheat in the bin and I think it will end up with a feeder.  That tells me where supply is and is expected to be.

 

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Veteran Contributor

Re: Protein Wheat - sw

sw you should check around on bids for that high protein wheat if it is above 56# TW as a lot of wheat in the NW Kansas area was in the 9 to 10 area and someone might bid you a good premium for it vs. feedlot prices.  Just a thought.

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Senior Advisor

Re: Where we are now

If I had 15% hi pro wheat I would certainly be keeping it in my location. Your market and location  may have entirely different metrics. N Dakota seemed to be heading toward lower protein though a recent spell of hot weather is considered favorable. Much of Canada's wheat has been buried in rain and may be lower protein. Europe is a mixed bag but expecting lower protein in some areas.

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Honored Advisor

Re: Where we are now

My point was that the feeders are biding up more than i have seen. 

But my inclinations is to agree with you and see where the premium goes.  That would be our normal direction.

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Veteran Advisor

Re: Where we are now

Pal,

 

Well put and all I have to say is that I feel for the producers that have invested a lot and things are not turning out to their liking.  Unfortunately, you are right, there is a lot of opportunity and as a trader I have been picking opportunities to come in and out.  I really do not need to trade everyday now with these type of swings.    

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Senior Advisor

Re: Where we are now

The farmers that have to watch crops decline under harsh conditions have a tough row to hoe. It's not a way to build optimism. I refuse to condemn those who can't come up with the easy answer to make it all go away.

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Veteran Advisor

Re: Where we are now

If you add up all the rain we got since the first week of May, we had about a half inch, in 3 events.

Not only that, we had lots of hot weather, as well.  It cooled down to 90-95 for the highs, and it feels downright comfortable (had it up to 113, and it was 115 in McCook - twice).

Marketing is hard to do in situations like this.  How much does a person sell?  I sure don't want  a short crop, and have to buy corn at $9 to fill a $6 contract, but on the other hand, new crop is about $6.25, which would give me a good return.  If I wait until I see how many bushels are made, it might be back under $5 (or over $7). 

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Senior Contributor

Re: Where we are now

Neb, that is the quandry we all have.

Picking away at sales got a few contracts earlier at decent prices which now look low and as the dry weather keeps impacting the crop in the field it is hard to contract more and of course the rising market makes a person wait (greed) for even higher prices before contracting even more.

Now when, not if, the market prices fall will I get some contracted soon enough or wait for another rebound that does not come (hope).

We could all be selling later into a lower priced market (fear).

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