109 – Are the Ag Markets Gloom and Doom over ?

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flooded field of cornBoy, for what seemed like a long time all the experts in agriculture had a lot of gloom and doom they were spreading.

Well, maybe they are not as bearish now.

For awhile they were correct, but in the end I wonder where we are going to end up.  My hunch is we are into a higher grain price for a couple of years, at least through 2016 and then down into cycle lows the end of 2017/early 2018.

I hear crops are very good in parts of Minnesota and Iowa, but they are not terrific where I am at.

Now, we do have some very good looking cornfields on very well drained fields but we have way too much water on everything else.  Soybeans look terrible.

I also suspect the livestock markets will drift lower as grain prices rally.  Especially feeder cattle and since 2016 should be a cattle cycle low, if that cycle is still around, which I think will happen because too many bred heifers have been retained or are planning to be.  So, higher grain prices in 2016 coupled with too many females that will need to be liquidated equals a 2016 cattle low.

Back to the grains.

Too wet in much of these United States, dry and hot in Europe, trouble brewing in Ukraine and Russia.  I just see grains moving higher for awhile.

What about Greece, what about the stock drop in China?  They could be something of a problem especially China, but I am more afraid of a U.S. stock market collapse this fall that could temporarily drop agricultural markets.

What about Gold and Silver?  Looks to me the big banks want stocks to go ever higher and commodities to go lower.

Where is crude oil headed?

Why does all this matter to farmers and ranchers.

So where to from here?

What about higher interest rates???  Federal reserve seems to want to raise rates, but can they, or will they?

What about buying power.  What do I mean by that? People that have saved for retirement now have to burn through their nest egg instead of being able to get a decent low risk return.

“Old” return 5% of $1,000,000 equals $50,000 per year.

Now 1% of $2,000,000 equals only $20,000 per year.

Which forces people who should not be taking big risks into the stock market to earn higher returns, but at much higher risks.

So, once again how does this affect farmers and ranchers?????   Well for one people with money in the bank buy ground at high prices looking for better than a 1 to 2 % return on money in the bank.

Money in a bank, that by the way can be used to bail out banks and bond holders.  Just ask Cyprus and soon Greek investors,

So, with all this no gloom and Doom.  Probably later but not now.  I figure grains have one more run to the upside and livestock will have a run after that.

One problem though is production costs. These cost are too high, which will impact profitability.  Higher grain prices will delay a day of reckoning for input suppliers.  This is where the rubber will meet the road in the future,

I also look long term and see world wide declining birth rates and how will this shake out agriculture.  I call it “peak people”.  Now that will be negative long term.

Thanks for listening to my farm podcast

Tell me what you think.

2 Comments

  1. Rosalie said:

    Nice website!

    July 22, 2015
    Reply

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