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hardnox
Advisor

record bean yields?

https://portal.rjobrien.com/MarketInsights/Data//MarketInsights/Blogs/2016/08/24914/CWGAMWeather8111...

 

Pretty well covers it all should it play out. Probably a week later than ideal for some of the eastern areas but still going to hold and add a lot of bushels.

 

I'm probably a little more bullish bean yields than corn at this point. The warm nights argument isn't valid for soys.

 

But who knows, nothing is absolutely certain. Given the hot/wet pattern maybe we'll have an Argentina style harvest. Which is why one should never throw caution to the wind with certaintly about anything.

 

BTW, even with excellent demand a 50bu US crop almost certainly pushed carryout up above 500mb.

Which probably makes price check out some price territory not seen since the crisis.

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9 Replies
roarintiger1
Honored Advisor

Re: record bean yields?

Haven't had a significant rain here in NW Ohio since mid June.   I'll believe it when I see it.

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hardnox
Advisor

Re: record bean yields?

https://www.nass.usda.gov/Charts_and_Maps/graphics/soyyld.pdf

 

There's a corollary to Murphy's Law that says that all farm policies are destined to fail. You can't predict weather, yields, other events at all- really all you can do is extrapolate the past which will generally play out over time but with extreme volatility in the shorter term.

 

Present policy would have more or less worked if US bean yields had merely come in at trend the last couple (now likely 3) years. Given huge demand, beans would have led a bid for acres that would have also buoyed corn prices.

 

Soo...if this thing gets harvested, then, as I expected at the time, the countercyclical costs of the Farm Bill are going to shoot much higher than advertised and we're going to enter the LDP Lite era- getting paid to keep producing below the cost of production.

 

However, the countercyclical supports will decline over an extended period of low prices and insurance price guarantees will be less significant.

 

BTW, I don't see a political environment that suggests an interim change to the Farm Bill as in '98.

 

Weather somewhere will change it sometime but it might be several years.

 

 

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Hobbyfarmer
Honored Advisor

Re: record bean yields?

The change will happen only after John Deere has a few bad quarters.

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BA Deere
Honored Advisor

Re: record bean yields?

Some smart folks say that we`ve actually been in a recession since last year, we can only go on the "official" numbers which say we`ve been in a very weak recovery the last 8yrs..so, now it`s time again for an announced recession, probably after the election.

 

The $20 trillion will start to turn in it`s sleep a little bit and talk of cutting spending will get more serious.  Crop insurance will have it`s head on the block (how do you sell a Norman Rockwell image farmer to the population that only sees NAT* approved farmers?)   If a farmer can pay $12,000 for land, shouldn`t he be able to spend $30 buying his own crop insurance?    Don`t beatup the messenger, that will be the question that will be asked.  And I don`t have an answer that will fit on a bumpersticker.

 

 

*NAT approved is National Ag Talk approved, Bigshot stuff. 

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hardnox
Advisor

Re: record bean yields?

There are bigshots and then there are Bigshots.

 

There are some family farm entities that are stronger than bull's breath and mostly just used the boom to consolidate into an even stronger position than ever.

 

For every one of those there are three that are going to be tested, some severely, in this environment.

 

Good yields most places are going to help a lot but still going to be some across the board $100/acre losses. Multiply that by X thousand for a couple years it gets serious, even if the balance sheet recently had a mid-high single digit, 7 figure number at the bottom.

 

The asset side of that ledger is going to slide a bit too, as land sags a bit from the high and used equipement a lot. On farm grain facilities arguably provide more return but tend to have a FMV well below cost.

 

I guess if there's anybody with a lot of pull who may find it urgent to bail them out it would be the vendors who have some big financing exposure there and are generally in a junior position to the primary lender.

 

Which.....actually weakens the argument that was valid in the 80s- there was huge public liability already baked into the cake via the FDIC and FCS so might as well do the more popular thing and fund a huge public bailout.

 

We don't have direct exposure via Deere and Monsanto et al although in our neoliberal world I guess we all own a smidgeon via The Ownership Society. Anything can and will be argued, I'm sure.

 

*as far as the budget hysteria goes, it is true that when the late 90s bailout doubledown occurred we were in this odd little period where we were congratulating ourselves on the balanced budget, so throwing another $15B a year into something that was necessary for making deals with a certain bloc of lawmakers seemed harmless enough.

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BA Deere
Honored Advisor

Re: record bean yields?

The stategies that win in a Monopoly game are also the best stategies to`ve used in farming the last 30yrs...just buy buy buy and build build build and let tomorrow take care of itself.  Well guess what, it`s "tomorrow".

 

Machinery sales have been going cheap, bankers will probably write down balance sheets this winter...I mean a 9500 combine that`s been pampered, if you give over $19,000, you`re paying too much and I`ll bet alot of opperating statements have them valued at +$30,000.  So that is a can of worms.

 

 

There`s just so damned much money out there these days.  it wouldn`t surprise me if the 2,000 acre little-bigshot gets sold out and gobbled up by the 25,000 acre big-Bigshot.  Car dealers, cell phone app inventors, anyone one looking for a place to park their unlimited cash might see funding the growing 25,000 acre big-Bigshot as a good risk.

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Hobbyfarmer
Honored Advisor

Re: record bean yields?

many with the money arent in a hurry to catch a falling knife.

 

cash corn is under $3 many places, renters are going to be hard to find to paythe big bucks rent.

 

some still asking big money for the ground they inhierited, 4 x 8 plywood signs have been on the corner for some time now.

 

those "25,000" acre big shots can't trade up machines as fast or even at all. Kind of hard when they are only offered auction prices for their one or two year old machine on the upgrade.

 

been some come to "Jesus" meetings last spring and many more to come this winter.

 

 

My seed dude lost semi loads of seed sales this spring because several of those  "big shots" had no payment capicity or plan.

 

my seed cost for tripple dipples was $165 bag, was "guarrenteed" would not be more than that...this upcoming season. {was one of those co's BA Deere mentioned}.

 

maybe they got the memo!

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hardnox
Advisor

Re: record bean yields?

BTW, I see problems, but not a systemic problem that requires a major intervention.

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BA Deere
Honored Advisor

Re: record bean yields?

Hobbyfarmer, up here in these parts, things wouldn`t have gotten so crazy if it was only farmer money at stake.  There`s outside money, either directly or indirectly, I know for a fact that car dealers, chemical/seed windfall guys, implement dealers, cell phone battery refurbishers...they just come in and partnered with a farmer and poured money in and it`s so damned much money I don`t think they care if land prices go up or down, they just buy hold and buy more.

Back in the 80`s you had 1,000 acre bigshots that went to the banker hat-in-hand, got a write-off of bank and taxpayer money.  "This time" if there is a this time, the taxpayer money won`t be there.  The banks only went along $3,000-$4,000 on this land, if little Bigshots are closed out, it`ll be the golden boy 25,000 acre farms that will absorb those 2,000 acre chunks.  All the little Bigshots are kind of in the same boat, to be honest too much of their farm income goes to their standard of living in many cases.  The Big-Bigshot just takes $10/acre for his living expense.

 

 

If $12K land drops to $2,000, they`ll be all kinds of outside money pouring in to get in on the bottom floor.  The 2,000 acre guy isn`t enough to mess with.  The 25,000 acre guy soon to be 100,000 acre guy has those rare combination of skills to pull all that off.  He might have to lower his $300,000 lifestyle and sell his Okoboji boat slip and Boca winter home, but his management skills will be needed.

 

But those Big Big guys buy their inputs for half price give or take, lease machinery, multiple unit discounts and such, that extra money goes into these crazy high rents.

 

But on the order of the cow/calf guy in some cases being 70 yrs old living off social security, basically donating his time, capital and wages.  With wealthy car dealers and such pouring capital into production agriculture, perhaps there won`t be a "day of reckoning"?

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